Friday, August 21, 2009

Yahoo Launch wins appeal ruling over license fees

Newsday: Online radio service wins ruling over license fees:

"In short, to the degree that LAUNCHcast's playlists are uniquely created for each user, that feature does not ensure predictability,' the appeals court said. 'Indeed, the unique nature of the playlist helps Launch ensure that it does not provide a service so specially created for the user that the user ceases to purchase music."
This bodes well for Pandora as well, rumors were circulating saying that the RIAA was going to go after Pandora claiming it was an interactive service as well.

Interactive services, or "Music on Demand" services, are not covered by the DMCA/CRB compulsory license, and have to be individually negotiated with the copyright owners. The original suit dates back to 2001 and originally was settled in Yahoo Launch's favor.

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Wednesday, May 13, 2009

Performance Rights Act (HR 848) Approved, on way to passing

The House Judiciary Committee approved the Performance Rights Act (HR 848) today, with 21 in favor, 9 not in favor.

It includes these rates that apply only to over the air broadcasts:

Any station that makes less than $100,000 annually will pay only $500 annually for unlimited use of music.

Any station that makes less than $500,000 but more than $100,000 annually will pay only $2500 (half of the amount in the original version of the bill) annually for unlimited use of music.

Any station that makes less than $1,250,000 but more than $500,000 annually will pay only $5000 (unchanged since the bill was introduced)) annually for unlimited use of music.

The bill also includes a statement of "Parity for all radio services" which establishes a “placeholder” standard to determine a fair rate for all radio services that will encourage negotiations between the stakeholders

As I've mentioned before compared to AM/FM broadcasters, Webcasters currently get a really bad deal: A webcaster with 1.25 million in revenue would be paying about $140,000 while an over-the-air broadcaster would only pay $5000. A webcaster with $250,000 in revenue would be paying $25,000 a year while an over-the-air station would pay 1/10th that.

SomaFM joined over 300 other broadcasters in signing a letter to Chairman Conyers and Ranking Member Smith [PDF] asking them to amend the Performance Rights Act to extend small broadcaster protections to small webcasters.

On the webcasters side, Rep. Zoe Lofgren of California spoke passionately and convincingly of this need to extend small broadcaster royalty limits to small webcasters. Unfortunately, a specific webcaster inclusion was not put in this version of the bill, so we'll need to do more lobbying of Congress to get it included in the final bill.

In related news, The Webcaster Settlement Act of 2009 was also introduced. The text is basically the same as the WSA 2008, the biggest difference being instead of a specific date for submitting deals for publication (a deadline which has already passed) the new bill gives 30 days from enactment to finalize deals.

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Tuesday, May 12, 2009

Webcasters deserve the same deal as over-the-air Broadcasters

The terrestrial broadcast performance royalty bill, officially known as "The Performance Rights Act" (H.R. 848) [alternative link], will also be considered by the House Judiciary Committee today. Unlike webcasters, the rate would be $5000 a year for stations with revenues up to 1.25 million dollars. A webcaster with 1.25 million in revenue would be paying about $140,000 a year to play the same music.

Doesn't seem fair does it?

If this indeed passes, and there is a good likelihood it will, then we need to demand that webcasters who broadcast non-interactive radio streams should also get to pay those same rates.

Here's the relevant text from the bill:

SEC. 3. SPECIAL TREATMENT FOR SMALL, NONCOMMERCIAL, EDUCATIONAL, AND RELIGIOUS STATIONS AND CERTAIN USES.

(a) Small, Noncommercial, Educational, and Religious Radio Stations-

(1) IN GENERAL- Section 114(f)(2) of title 17, United States Code, is amended by adding at the end the following:

(D) Notwithstanding the provisions of subparagraphs (A) through (C), each individual terrestrial broadcast station that has gross revenues in any calendar year of less than $1,250,000 may elect to pay for its over-the-air nonsubscription broadcast transmissions a royalty fee of $5,000 per year, in lieu of the amount such station would otherwise be required to pay under this paragraph. Such royalty fee shall not be taken into account in determining royalty rates in a proceeding under chapter 8, or in any other administrative, judicial, or other Federal Government proceeding.

(E) Notwithstanding the provisions of subparagraphs (A) through (C), each individual terrestrial broadcast station that is a public broadcasting entity as defined in section 118(f) may elect to pay for its over-the-air nonsubscription broadcast transmissions a royalty fee of $1,000 per year, in lieu of the amount such station would otherwise be required to pay under this paragraph. Such royalty fee shall not be taken into account in determining royalty rates in a proceeding under chapter 8, or in any other administrative, judicial, or other Federal Government proceeding.'.

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Sunday, March 1, 2009

Rusty speaking at SXSW on DMCA issues

I'm speaking at SXSWi on "Rewriting the DMCA: How to Improve Section 114":

``This panel will discuss the ugly bits of the Section 114 compulsory license for digital/internet music usage, and what parts are in it for historic reasons that don't apply in todays world; as well as changes that both users of the licenses (webcasters) and content providers (artists, labels) would agree to.``

Tuesday, March 17th; 11:30 am - 12:30 pm Room Hilton E

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Monday, February 16, 2009

Other deals on the horizon?

While the NAB has a deal in place, others, including small commercial webcasters, religions and non-commercials, Pandora and possibly Real Networks (Rhapsody) also failed to come to a deal in time by the deadline of Feb 15th. DiMA, part of the Save Net Radio coalition and the organization representing clients like AOL, Yahoo and other large webcasters, has not announced a deal either.

There was some talk that because the 15th was a Sunday and the 16th was a holiday, that the real deadline is the 17th so there might still be a deal made.

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Wednesday, February 11, 2009

Muzak Files Chapter 11 to Refinance Debt - NYTimes.com

Muzak Files Chapter 11 to Refinance Debt - NYTimes.com:

"Many of Muzak’s biggest creditors are music companies that license songs for use on Muzak playlists. While the company is known as the creator of elevator music, its business is now more focused on creating playlists for use in retail stores, installing professional sound systems and providing other services."
So even industry giant Muzak is being crushed by the high cost of licensing music.

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Monday, February 9, 2009

Does the New Administration change anything for radio royalties?

It seems that the RIAA, Recording Academy and MusicFirst think the new administration will be more on their side than the old administration:

Neil Portnow, CEO of the Recording Academy said last night at the Grammys:

“When it comes to protecting a musician's intellectual property and the right to earn a living, The Academy says, "Yes, we can!" And with a new Congress, we will champion the passage of pending legislation to ensure, that just like in every developed country in the world, all music creators are compensated for their performances when played on traditional radio.”

Historical datapoint: he DMCA was passed under the Clinton administration, and the DMCA is what has placed huge royalties on internet radio. The Performance Rights Act of 2009 will add those same royalties on over-the-air broadcasters that internet broadcasters now pay. While on one hand, I think it's great that there is equality for over-the-air (often referred to as terrestrial) broadcasters, but I'm concerned that rather than one fair, small royalty placed on everyone will actually end up being one really large royalty levied on all broadcasters, terrestrial and internet.

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SoundExchange Offers Settlement To Webcasters

Billboard is reporting that SoundExchange has made a new settlement offer to webcasters: but it's not the results of negotiation, it's a unilateral offer, and it's ultimately won't work for webcasters like SomaFM.

I'm quoted in the Billboard article saying:

"'We're disappointed with the offer,' says Rusty Hodge, founder of SomaFM. 'It effectively is worse that the previous [one]. Basically SoundExchange has done nothing to comprise with webcasters at all.'"

This hasn't been a negotiation. This has been a series of offers that gets worse each time. The original SWSA passed in 2002 was better than the current offer. The offer made about 18 months ago was the same as the current offer except that there were less strings attached; and because at that point, the offer only applied to SoundExchange member artists.

The current offer is just the same old offer with more restrictions and limitations. There has been no compromise. Every counter-offer webcasters make is met with a less-desirable offer from SoundExchange.

The really big issue for SomaFM is the traffic limits of 5 million monthly aggregate tuning hours. While that number sounds big, in January, we did did about 6.2 million. 5 million monthly tuning hours equates to 6720 average concurrent listeners. And the SoundExchange offer technically applies to US-only listener hours, which is about 50-55% of our listeners, so we're still technically under the limit. But this means that as we grow in the future we're going to hit that cap, and we'll be forced to limit the number of listeners we have.

The big RIAA labels are threatened by independent internet broadcasters and want to make sure that we're constrained to a niche market.

We're very disappointed with this so-called "offer".

The RIAA is still out to kill off independent webcasters like SomaFM.

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Wednesday, February 4, 2009

Conyers, Issa Re-introduce Bipartisan Performance Rights Legislation

This bill as it stands probably doesn't do much for webcasters, other than propose to take away the exemption for terrestrial broadcasters. I'm disappointed that it doesn't say that all forms of broadcasting will pay the same price, be it terrestrial or digital. Media Week has more on the story, including the response from the NAB, including this quote from NAB's letter to House Speaker Nancy Pelosi:
Three of the four largest record label conglomerates -- Universal Music Group, Sony Music Entertainment and EMI -- are internationally-based" and "although the big record labels have seen their revenues decline over the last decade, local radio broadcasters are not the reason the recording industry is losing money, and it should not be the industry to fix it.
 

Here's the text of the press release:  

WASHINGTON. D.C. – Today, House Judiciary Committee Chairman John Conyers, Jr. (D-MI), and Darrell Issa (R-CA), introduced The Performance Rights Act, a bipartisan measure that takes a first step at ensuring that all radio platforms are treated in a similar manner and that those who perform music are paid for their work.   

The legislation would amend an inequity in America's copyright law that exempts over-the-air broadcasters from paying those who perform the music that we listen to on AM and FM radio.  Webcasters, satellite radio providers and cable companies are presently required to pay for music they broadcast.   

"Beyond the fairness that this bill provides for performers, we have an opportunity to show the rest of the world that the United States practices what it preaches in protecting intellectual property," said Issa. "For the past 70 years Congress has ignored the constitutional mandate that we protect copyrights by completely exempting broadcasters from paying performers, while the vast majority of countries have no such exemption.  Our ignorance of intellectual property rights on this issue is a worldwide embarrassment and it must end now."   

"All those in the creative chain of musical production - the artists, musicians, and others who enrich us culturally - deserve to be justly compensated for their work," said Conyers.  "We have introduced the Performance Rights Act to ensure fairness so that any service that plays music pays those who create and own the recordings - just as satellite, cable and internet radio stations currently do. Working with the Senate, I hope that Congress may act quickly to pass this important legislation to level the playing field between different technologies and ensure rightful compensation to performers."  

  The Performance Rights Act is cosponsored by Reps. Issa, Berman, Waxman, Blackburn, Hodes, Wasserman Schultz, Weiner, Cohen, Nadler, Wexler, Peterson (MN), Johnson (GA), Schiff, Sherman, Shadegg, Jackson Lee, L. Sanchez, and Harman. Companion legislation was introduced Wednesday in the Senate by Judiciary Committee Chairman Patrick Leahy (D-Vt.) and former Chairman Senator Orrin Hatch (R-Utah).   

"In introducing the Performance Rights Act, we are sensitive to the needs of broadcast radio stations," said Senator Patrick Leahy (D-Vt.), Chairman of the Senate Judiciary Committee.  "I want to ensure that the performing artist, the one whose sound recordings drive the success of broadcast radio, is compensated fairly.  Our legislation, appropriately, permits noncommercial stations to take advantage of the statutory copyright license subject only to a nominal annual payment to the artists.  Similarly, we intend to nurture, not threaten, small commercial broadcasters.  Smaller music stations are working hard to serve their local communities while finding the right formula to increase their audience size.  I will continue to work with the broadcasters – large and small, commercial and noncommercial – to strike the right balance."    

"This legislation would ensure that musical performers and songwriters receive fair compensation from all companies across the broadcast spectrum - not just from Web casters, satellite radio providers and cable companies," said Senator Orrin Hatch (R-Utah), former Chairman of the Senate Judiciary Committee.  "It is an attempt to strike a harmonious balance between fair compensation for artists and a vibrant radio industry in the U.S."   

 

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Tuesday, October 7, 2008

Wasn't internet radio killed last year?

KG Writes in:
I thought internet radio was killed last year. What gives?

SomaFM and most other internet broadcasters have technically been operating "out of compliance" (that is, we're not paying the royalties we are supposed to be paying). At some point, we can't keep doing this... someone will sue us for copyright infringement. SoundExchange has informally agreed to not sue any broadcasters who continue negotiations with them, that's why stations are still on the air. Other large services like iMeem and Last.FM have made direct deals with the large record labels, in most cases resulting in the "Big 4" record labels owning a part of those companies. (And with that ownership comes influence over the music they feature.)

So making a deal with the big record labels is not acceptable for most broadcasters who strive to be independent in the music they broadcast.

We have continued to negotiate with SoundExchange (the agency that collects the royalties) over the last year, and are close to a settlement. Originally, one problem was that a SoundExchange settlement would only cover their members, and not apply to all music as the CRB ruling did, unless congress acted to codify any settlements. HR. 7084 which was recently signed into law, does exactly that: it tells the CRB that they have to codify any settlement internet broadcasters and SoundExchange agree to. This is the only way we can get the royalties reduced to a reasonable level.

Internet radio is running on borrowed time. But even without a deal, big, venture-capital funded services like Pandora will likely survive in a slightly altered form: they'll have to make deals with all the major labels which will cause them to lose some of their independence. But small stations like SomaFM will be put out of business: either by lawsuits from the RIAA if we continue to operate without paying the royalty fees or more likely by just not having enough money to continue our operations after paying all these royalties.

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Wednesday, October 1, 2008

H.R.7084 passed in the Senate!

Sunday, September 28, 2008

Zoe Lofgren supporting the Webcaster Settlement Act of 2008

Zoe Lofgren (D - CA) on the Webcaster Settlement Act of 2008. It passed in the house, but still needs to pass in the Senate, and the NAB is opposing it.

Don't forget: we still need to get it passed in the Senate!

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Saturday, September 27, 2008

Webcaster Settlement Act of 2008 passes in the House!

Thanks to everyone who called their representatives. The Webcaster Settlement Act of 2008 has passed the house, now it's onto the Senate. We'll need to call them in the next 24 hours and ask for the support of "HR 7084, The Webcaster Settlement Act of 2008" (it's still called HR even though it's in the Senate).

Look up your Senator's phone number and call them. You can leave a voice message after hours.

All you need to say is "Please support HR 7084, The Webcaster Settlement Act of 2008, in the Senate. I support internet radio and want to see a fair royalty agreed upon."

The Senate will resume Monday morning, September 29th, and will consider this in the morning. If we leave messages this weekend, we can show that there is considerable grass roots support for it, and it will greatly lessen the impact of the NAB's opposition to it. And calling on Monday as well is a good thing to do; as there is a good chance it won't be passed first thing.

Summary & Background

H.R. 7084 contains technical amendments to the Small Webcasting Settlement Act of 2002 (P.L. 107-321) which will permit commercial and noncommercial webcasters to negotiate royalty rates and terms other than those determined by the Copyright Royalty Board (CRB) in its May 2007 decision. That decision was the basis for legislation introduced last year and is currently subject to a legal challenge at the D.C. Circuit Court of Appeals, which has, thus far, upheld the market rates and terms set by the CRB.

The principal purpose of the legislation is to facilitate a reduction in Internet streaming rates, something H.R. 7084 will permit to be voluntarily negotiated by willing parties rather than imposed by Congress. Essentially, this bill will allow SoundExchange, the organization which collects royalties on behalf of the music industry, to reach a settlement with the Digital Media Association, the national trade organization for the online audio and video industries.

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Wednesday, September 24, 2008

The internet radio royalty issue is NOT settled, as some news sources have reported

The Internet Radio proceeding has not been settled. We are still trying to get a settlement with SoundExchange which can be approved by the CRB judges.

This ruling only applies to Section 115 of the copyright law, and covers "interactive streaming music and limited digital downloads," and it's only the royalties that cover the "composition" of the recording, not the sound recording. Interactive streaming is defined as music on demand, such as Rhapsody or Napster, and not services like Pandora or SomaFM.

Basically, this settled things for Rhapsody, iTunes, Napster and a few others; it doesn't affect streaming radio stations at all. :-( Our issue is with SoundExchange over the "sound recording" part of the copyright royalties, we already have a suitable agreement with the licensing agencies that handle the "composition" (BMI, SESAC, ASCAP).

Attorney David Oxenford discusses this in his blog:

While many press reports (at least some of which have already been pulled) have concluded that this is a settlement of the Internet Radio royalties proceeding - that is wrong. The Internet radio royalty proceeding involves Section 114, not Section 115, of the Copyright Act. Section 114 deals with a royalty paid to the performers, not the composers.

And it's not about paying the RIAA. The RIAA was on the other side of the table from the music publishers. Because Sound Recording copyright owners have to pay the composers when they release tracks (on CD or digitally). So in this case, the RIAA is the buyer, where as with internet radio, the RIAA is in the position of the seller (at least they claim to represent 80% of the sellers).

Internet radio is still in trouble. This did not solve things.

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Monday, September 8, 2008

Can Payola can save Internet Radio?

Doug Perlson writing in Silicon Alley Insider thinks that Payola can save Internet Radio from the high royalties that we currently face.

From strictly a financial-gain perspective, he may be right.

But for broadcasters looking for a long-term sustainable business, and not a short term financial gain (such as getting bought out by a larger company), this approach will not have success.

First off, "Payola" is not illegal in the net-radio space. In fact, it's already happening lots of places. The big labels have equity positions in several of the largest webcasters. You don't think those labels are influencing what gets played? Of course they do.

SoundExchange (the agency that collects the royalties for internet radio) is even encouraging this behavior, suggesting that stations work with labels to play the music that labels will let them use without royalties... except those deals are always more complex than that. (Basically, they give the labels control over what gets played. "You can use this particular music for free, only if you give x number of plays to these other tracks.")

I'm happy that some of the larger guys, like Pandora, have demonstrated their opposition to this. But many others, who are proponents of "direct licensing deals" are already playing the Payola game.

Music should be chosen on its artistic merit, not because of a opportunistic financial decision.

Payola, while technically illegal, has still been happening at AM/FM radio stations (under the guise of "independent promotion"). Many FM radio stations were so reliant on "promo money" that it was a significant part of their annual operating budgets- especially in mid and smaller markets. And while this practice has come under fire and largely discontinued just recently, many variations on the game sill exist, and you're fooling yourself if you think that labels have stopped using money to influence program and music directors.

Many people (including myself) believe that this is what has caused consumers to turn away from commercial radio: programmers were playing what they were paid to play rather than choosing the best material to play. So commercial FM became the land of the safe, proven hits of the past and the crap that the labels were paying to get played.

The people who say this would work for net radio have never been on the receiving end of the music promotion industry. There are tons of crappy records that labels (big and small) would happily pay to get played on the radio. But listeners are smart, and have plenty of options to choose what they want to listen to. They'll just start "tuning out" if this happens.

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Wednesday, July 30, 2008

Internet radio sites push for lower royalties for artists

Austin American-Statesman:

Internet radio sites push for lower royalties for artists

"Satellite and cable radio stations pay royalties at a rate of less than 15 percent - far less than Internet sites - Kennedy said. Traditional AM/FM radio stations are exempt from paying royalties.

Sen. Ron Wyden, D-Ore., who has sponsored one of the Internet radio bills, said the royalty fee schedule improperly imposes the highest rates on the newest forms of technology.

'We are allowing the royalty process to serve as a tax on technology and that is discrimination against innovation,' he said."

Lots of information in the full article, the above was just a brief quote.

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Thursday, May 15, 2008

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.

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Monday, February 18, 2008

SXSW Panel: The Trials and Tribulations of Using Music Online

Be sure to come by the panel I'm on at SXSW: The Trials and Tribulations of Using Music Online.
This panel will discuss the usage of music for various online formats, including (but not limited to) podcasting, blog MP3 postings, internet radio, and vlogs (or other video). This session will address the different copyrights, licensing, and royalties associated with different types of use. Learn how and why you need to get copyright and/or licensing clearance for the music you use, and which clearances you need for which uses in order to operate legally. We will also discuss copyright royalties, royalty payments, and royalty collectors, including SoundExchange, ASCAP, BMI, and SESAC.
Should be fun. If you've never met Richard Bengloff (who heads up A2IM and is on the SoundExchange board and will be on this panel), he's a great guy who is amazingly knowledgeable about the music business, and genuinely cares about artists and content creators. Rich and I don't always agree, but I learn something every time I talk to him.

I can't wait. The other folks on the panel are all great as well (Brian Zisk and Chris MacDonald) as well as our moderator Elise Nordling (who besides programming and hosting Indie Pop Rocks works for IODA, an online music licensing company).

Room 10
Tuesday, March 11th
3:30 pm - 4:30 pm
South by Southwest, Austin, TX

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Tuesday, January 22, 2008

CRB Update

Just a quick update on the CRB / Royalty issue:

SoundExchange and small (and large) broadcasters continue to hold discussions on the royalty situation. SoundExchange has made an offer to small webcasters that has some problems, but the base rate is acceptable. (What's not acceptable is the proposed limitations on listeners and revenue caps).

We've verbally agreed to continue paying at the 2006 rates while the discussions continue. I don't think SoundExchange wants to shut down most webcasters; and I've been told by several SoundExchange board members that they think highly of what SomaFM is doing.

One other thing: it looks like the Copyright Act is getting a substantial re-write due around 2010 and will treat analog and digital systems the same. We learned this meeting with members of the House and Senate Judiciary committees this summer.

So that's it: not much of an update, but that's what we know now.

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Monday, January 21, 2008

CRB denies SoundExchange's request for rehearing for Satellite radio rates

The CRB ruled that Sat Radio would pay 6.0% (increasing to 8.0% by 2012) of their adjusted gross revenues. Apparently, SoundExchange doesn't like the exceptions to the gross revenue that the CRB allowed.
On December 3, 2007, the Copyright Royalty Judges (“Judges”) issued a Determination of Rates and Terms in this matter (“Initial Determination”). Pursuant to 17 U.S.C. § 803(c)(2) and 37 C.F.R. Part 353, SoundExchange, Inc. (“SoundExchange”) filed a motion for rehearing “to reconsider the definition of Gross Revenues set forth at pages 28-31 of the [Initial] Determination; and, in light of recent predictions that approval of the XM/Sirius merger is imminent, reconsider its unwillingness to assess the impact of a merger as part of its [Initial] Determination.” The Judges permitted a response and XM Satellite Radio, Inc. (“XM”) and Sirius Satellite Radio, Inc. (“Sirius”) (collectively, the “SDARS”) filed a timely response, opposing the motion. The Judges now deny this motion. Nevertheless, as discussed below, the Judges have determined that one limited area of the Initial Determination warrants clarification.
PDF of full decision here.

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Tuesday, December 4, 2007

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?

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Wednesday, October 24, 2007

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

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Thursday, October 11, 2007

Senator Clinton "backs webcaster compromise"

Wired is reporting that Sen. Clinton Backs SoundExchange/Webcaster Compromise, although the letter they print from her to her NY constituents isn't that much different from the letters coming from all other senators: namely, "we don't want to legislate, but back a compromise between webcasters and SoundExchange".

Alas the big problem is that if there is no change in legislation, only SoundExchange member artists and labels will be affected; stations will still have to pay the highest CRB rates for non-SX material.

And that's a serious problem because of how few of the artists played by independent webcasters are SX members.

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Wednesday, September 26, 2007

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?

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Wednesday, September 19, 2007

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

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Tuesday, September 18, 2007

More Bullshit from RIAA via SoundExchange

RIAA has SoundExchange issue press release to try and trick congress into thinking the royalty situation has been solved. Nice work guys.

The reason many people are signing is because they fear lawsuits from the RIAA. RIAA representatives have been calling webcasters and telling them if they didn't sign by Sep 15th, they would be operating in violation of the law. That's the only reason they signed. It's like a Sporano's episode.

The only way that webcasters can escape the high royalty rates is by signing this current agreement and only playing SX affiliated label music. This means less independent music, and more big label music. Which is exactly what the RIAA wanted.

This agreement is useless to SomaFM because it doesn't even cover half of the music we play.

Here's the release:

Small Webcasters Embrace SoundExchange Offer on Discounted Rate - September 18th, 2007

Individual Agreements Allow Small Internet Operators Subsidized Rates Through 2010

Contact Richard Ades or Gregg Perry 202.640.5894 news@soundexchange.com

WASHINGTON, D.C. - SoundExchange announced today that significant numbers of small commercial webcasters have signed agreements that allows them to continue operating through 2010 with essentially the same terms they have enjoyed under the Small Webcaster Settlement Act (SWSA). These agreements - sent in late August and signed individually with each webcaster - guarantee the same rates through 2010 that qualified small webcasters have received since 1998 for the use of sound recordings owned by SoundExchange members. The agreements are retroactive to January 1, 2006, which is the beginning of the current rate period, and continue through December 31, 2010, at which time new rates will be set either through negotiation or by the Copyright Royalty Board (CRB).

"Giving small webcasters more time to build their businesses with below-market rates is something Members of Congress wanted us to get done, and we have," said John Simson, Executive Director of SoundExchange. "We hope that these small webcasters will continue to provide innovative kinds of programming and a rich diversity of music."

Twenty-four small webcasters have already signed the agreements with others indicating they are in the process of signing. Some opted not to sign the agreements because their business models benefit more from the regular commercial rates (due to their size and the difference in minimum payments). Others did not sign because they operate via webcast aggregators who handle payments on their behalf.

Qualified small commercial webcasters who accepted the offer are now able to stream sound recordings of any and all SoundExchange members at subsidized rates. SoundExchange represents more than 28,000 recording artists and 3,500 record labels, including all the major recording companies. As part of the agreement, small webcasters (defined as those earning $1.25 million or less in total revenues) would pay royalty fees of 10 or 12 percent of revenue. The agreement also includes a usage cap to ensure that this subsidy is used only by webcasters of a certain size who are forming or strengthening their businesses.

"It's a sacrifice our members are willing to make at the request of Members of Congress and in order to give the smallest webcasters below-market rates for an additional limited time," added Simson. "This is a great deal for someone who wants to start or build a webcasting business."

# # #

Gee. 24 webcasters signed this. If you're a webcaster and signed it, I'd like to hear your reasons for signing it.

The usage cap is also a joke: if you average more than about 6900 concurrent listeners- about the audience of a single commercial station in a mid-sied market.

There are thousands of small webcasters. And only 24 have signed on? That tells you just what a huge problem this really is.

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Thursday, September 6, 2007

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

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Wednesday, August 22, 2007

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.

 

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Wednesday, August 8, 2007

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.

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Wednesday, August 1, 2007

Notes from the Platform Equality hearing

Rep. Howard Berman, Chairman of the House Judiciary Subcommittee on Courts, the Internet and Intellectual Property, held a hearing on "Platform Equality", which would end the decades long royalty exemption for terrestrial broadcasts.

House Hearing on Ensuring Artists Fair Compensation

Howard Coble (R-NC), Steve Cohen, (D-TN), Lamar Smith (R-TX) and Darrell Issa (R-CA) were among those voicing support for the proposal to end the terrestrial broadcast sound recording performance royalty exemption.

The three main arguments for this according to Berman:

    • The exemption was never justified under copyright law
      Calbe, Satellite and Internet have to pay these royalties. There should be no discrimination based on platform.
      US us the only major country that doesn't have a sound recording performance right.
  • Terrestrial broadcasters currently only pay royalties to the composers of the music; the "musical work". They do not pay for the use of the sound recording. In 2005, broadcasters paid $450 million in muscical work performance royalties.

    Issa stated that congress is preparing to reorganize section 114 of the copyright act. (This is the sections that covers royalties for internet, satellite and cable services and provides exemptions for some other uses, such as use of music in business environments.)

    Issa spoke a lot about HD radio, and the threat it makes to sale of CDs. He is under the impression that the 64kb or lower compressed digital audio sounds as good as CD. HD does not stand for High Definition. It stands for "Hybrid Digital". Unlike HDTV, which improved the signal quality delivered to consumers, HD radio is not a marked improvement. Signal to noise ratios are improved, but there are audible compression artifacts in the audio.

    Issa also talked about a flood of HD radio recording devices that automatically split tracks coming out soon. (I think he's extremely wrong on this, there is so little uptake on HD hardware, there are only 2 or 3 HD radios on the market right now, and they're selling very poorly. I've heard a statistic several times that say an American is more likely to be run over by a bus than they are to listen to HD radio in the last year.)

    Steve Cohen, who represents Memphis, TN,

    San Jose, CA representative Zoe Lofgren was the only rep to speak out on the importance of small, independent internet (and non-internet) braodcasters. While she's not necessarily opposing the rate, she wants a rate that won't hurt small and non-commercial broadcasters.

    (more later)

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    Monday, July 30, 2007

    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.

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    Friday, July 27, 2007

    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.

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    Wednesday, July 18, 2007

    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...

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    Friday, July 13, 2007

    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.

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    Thursday, July 12, 2007

    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.

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    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.

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    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.

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    Monday, July 9, 2007

    RIAA blocking IREA, holding up any settlements

    I've heard "off the record" now from several sources that the RIAA has been the party behind a large mis-information push about the Internet Radio Equality Act.

    One example is claiming that the biggest internet radio services are giant corporations. With the exception of Yahoo and AOL, most of the largest internet broadcasters - in terms of listeners - are all independent operations.

    As Bill Goldsmith at Radio Paradise says:

    SoundExchange has been challenged many times, by numerous people (including myself) to give ONE example of a webcaster currently online in the U.S. who could operate successfully under the CRB rate structure. They have never done so, because there are no stations that meet that criteria.
    Instead, the RIAA brings up misleading statements of how most webcasters are all billion dollar corporations who could easily afford these rates, yet won't state facts. (I've asked members of the SoundExchange board as well as their news department to name the 20 major webcasters and gotten no response.) WHY? Because they can't name them because they don't have the facts to back it up.

    Additionally, the RIAA is holding up settlements that could be enacted (and congressionally codified). Independent artist representatives on SoundExchange's board support a settlement that's favorable to independent internet broadcasters, but since the majority of the SoundExchange board is controlled by the RIAA and the musician's union (which represents session musicians performing on RIAA label recordings), nothing is happening.

    Why?

    It should be obvious. The RIAA wants to force all webcasters to make direct deals with the Big 4 labels, because that's the way the Big 4 labels get control back. They want to control what you hear over the air.

    Don't let this happen.

    Get on the phone right now and call SomaFM's home town representative, House Speaker Nancy Pelosi's office at (415) 556-4862 and ask Speaker Pelosi to demand that the RIAA come to a fair settlement with small webcasters. Remind her that otherwise, the RIAA will end up forcing small webcasters out of business through impossibly high royalty rates. Also remind her that the majority of the "Big 4" labels represented by the RIAA are foreign-owned, and will be putting American companies out of business.

    Call her office now. You can leave messages after hours.

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    Sunday, July 8, 2007

    Why do Nashville Songwriters oppose the IREA?

    From nashvillesongwriters.com: Songwriters oppose the “Internet Radio Equality Act,” H.R. 2060, S 1353:
    This legislation contains provisions that would disallow performance royalties to be negotiated in the free market. Past history shows that other emerging technologies, including cable television and video rentals, made the same argument—that rates should be lower so they could compete. The industries became huge and the result was business models that are very unfair to the creators of music. Also, large corporations such as Clear Channel and Microsoft could end up being the biggest windfall financial beneficiaries.
    A few things:

    1. The IREA does not affect songwriter royalties.

    2. The IREA does not "disallow performance royalties to be negotiated in the free market". Sound-recording performance royalties can still be negotiated independently. Ironically, this is NOT the case with the composition performance royalties (paid through ASCAP, BMI, SESAC) which covers the songwriters.

    3. The rate cut that "large corporations" get isn't the most important part of this legislation. In fact, I'm sure those numbers were put there as a point of negotiation. Bills always get changed before they're passed. Why throw out the baby with the bath water? The important part of the IREA is the changes to the Copyright Act to treat satellite radio and internet radio on the same basis (that of a fair market value vs. a "willing buyer, willing seller" value which only internet radio is subject to now.)

    I think someone doesn't get it over there. Internet radio is paying royalties to the composers now. The IREA doesn't affect that. Higher royalties on the sound recording performance will reduce the number of internet radio stations, which will in turn mean less diversity in music programming.

    But then they also say:

    America has LOST TWO-THIRDS of its PROFESSIONAL SONGWRITERS over the past decade due to illegal downloading, piracy, radio deregulation and corporate mergers. Radio Deregulation has resulted in dramatically fewer spots on radio playlists. A few companies program the majority of country music reporting stations.

    So they're complaining about the lack of diversity in music radio, yet they're supporting a bill that will kill off much of that diversity. Hopefully they'll realize this soon.

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    Monday, July 2, 2007

    San Francsico Save Net Radio benefit very successful

    There was a benefit event for SaveNetRadio tonight in San Francisco, presented by SomaFM, BAGeL Radio, Sonic Living, The Owl Magazine, Pandora, Reap and Sow and Bottom of the Hill.

    Almost 300 people showed up and we raised $2000 though donations at the door, a bake sale, chili cookoff, a silent auction and raffle.

    Special thanks to the artists who performed: Ted of The Heavenly States, Matt of The Herms, HIJK, Miyako Ueki of Peloton, and thanks to Elise Nordling for being our MC for the evening and Corey Denis for "herding cats" and making the event happen.

    Raffle prizes care of SonicLiving, Griffin Technology, Logitech/Slimdevices, Peter Ellenby (Exclusive photos/art of the Shins & Death Cab for Cutie, singed originals), Show Posters by Jason Munn, The Owl Magazine, Willotoons, IODA, SomaFM and Pandora.

    I hope I'm not forgetting anyone. I'll try to get some pictures up soon.

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    Thursday, June 28, 2007

    Future of Music Coalition

    FMC, in their recent newsletter (note: not in their archive yet but will be soon), has reiterated four key points about the Internet Radio royalty situation:

    (Update: I should not that I'm merely presenting this as information, and I'm not endorsing everything here. I think it is a good starting point for discussion, which is starting to take place in the comments. Make sure you read the comments to this post!)

    1. Internet radio is an incredibly valuable music platform for musicians, fans and labels

    FMC supports the continued growth of internet radio. It has the unparalleled ability to develop loyal, worldwide audiences for niche musical genres -- from 60s rock to contemporary classical to southern blues. Small and noncommercial webcasters in particular have proven to be a valuable promoter of both independent music and genres that are routinely ignored by commercial broadcasters.

    2. Performers and labels should be paid.

    We have and always will support the digital performance royalty As webcasting continues to grow, and as consumers increasingly trend towards paying for /access/ to music delivered to them via subscription services, satellite radio, etc, the digital performance royalty becomes an even more important revenue stream for artists.

    3. Rates proportionate to the size of the webcasters.*

    We also believe that the "one size fits all" approach that was part of the March 2007 rate setting decision would be harmful to the small and non-commercial webcasters. There's a vast difference between the staffing and revenue generated by a volunteer-run internet radio station and an AOL or Clear Channel. These differences in resources and revenue - not to mention motivation for running a station - makes a tiered system the most sensible solution.

    4. Streamline the reporting process.

    FMC continues to believe that it's important to develop a reporting process that ensures that even the smallest webcaster can file timely and accurate playlists with SoundExchange. For years we have urged the development of an authentication database, managed by a neutral third party, through which copyright ownership and performer information would be verified. Such a database would reduce filling time and errors on playlists, thus making sure more money flows directly to artists.

    To summarize, FMC believes that large commercial webcasters should pay rates comparable to their size and revenue, and we call on the other parties to adopt reasonable rates and reporting requirements for clearly-defined categories of small, noncommercial and hobbyist webcasters that will ensure the future development of this medium.

    In the end, whether through legislation, court action or negotiation, FMC hopes that the webcasters and SoundExchange can work together to strike a balance that recognizes the value of webcasting to creators and listeners, but also properly compensates performers and labels for uses of their work.

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    The Economist: A battle over music royalties threatens a nascent industry

    From The Economist:
    The quest for higher royalties may actually be doing record labels more harm than good. People generally do not buy music unless they have already heard it. Internet radio makes it easy to zero in on a preferred genre, so listeners are more likely to discover music they would want to buy. Many online stations even provide links to online music stores—free of charge.
    Hey SoundExchange: wake up. Don't kill off this industry. You need it.

    (Maybe if SoundExchange would focus on trying to extract royalties out of the companies not paying them at all, instead of trying to get more from the ones who are paying now, they could increase their revenues and not hurt the current net radio industry.)

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    Wednesday, June 27, 2007

    Listener Questions: Will this really affect SomaFM?

    A listener writes:
    The question I have though is how badly are "ambient" stations like Soma going to be hurt? The music labels that put out this kind of music are not the big boys. I think most of them would realize that this type of broadcast is their best bet for getting heard. Aren't the royalties up to them? As for playing top 40 on the internet. Who cares. Let them have it.
    This law covers any and all copyright works, not just recordings owned by the big labels. The RIAA and big labels had a great influence over this law, but it applies to all copyrighted works. In order to play them without royalties, we need to get waivers from the copyright holders. So far many of the copyright holders are reluctant to grant us waivers.

    So, we would have to go back and execute licenses directly with every copyright holder whose music we play. That would be a few thousand licenses we'd have to do. Many of the copyright holders won't sign these licenses without having a lawyer look at them, and many of them don't want to pay a lawyer to look it over. Some have already said they won't grant a waiver, even though they like us to play their music.

    The reason the statutory law exists is so that radio stations won't have to enter into distinct legal agreements with the hundreds (or in our case thousands) or copyright owners of the material they play. We could easily keep one or more full time paralegals busy managing all the music licensing. It would also put large delays in the time from when we pick a song to play and when we're legally allowed to play it over the air.

    Ironically, direct licensing works best for people playing the Top 40. You can enter into blanket direct licenses with the Big 4 labels pretty easily. But their license terms encourage you to play the music they're pushing heavily and discouraging you from playing the songs they're not pushing.

    I believe that it is best for the listeners when we choose music based solely on its artistic merit, and not on any financial concerns. If we're playing a song just because it costs us less to play it than another song, isn't that the same as us taking payola to play a song?

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    Tuesday, June 26, 2007

    Yahoo's Ian Rogers speaks out

    Yahoo's Ian Rogers speaks out about the CRB royalty issues:
    The CRB made a mistake, handed Sound Exchange a loaded gun, and gave them the option to shoot Internet radio dead. How the CRB came from the testimony presented to this outcome is a complete mystery to everyone involved. I’m guessing Sound Exchange is nearly as puzzled as we are at this point.
    He also talks about how it affects big guys like Yahoo, and offers a bunch of insight into the whole CRB rate setting process, and offers some insight like:
    I’ve also had the pleasure of meeting with our representatives in Congress and understanding their position. Congress doesn’t like to set rates, and I think we’d all agree that we’d prefer they didn’t micro-muck with the economy at this level. Instead, they set up a process and a standard, we all went through the process, and they’d like to think the outcome served the needs of the people. Our continued protest just sounds like “wah! the rates are too high! wah!”, which they’re sick of hearing and I don’t blame them. So we’ve been working hard to show them that the conversation here isn’t just “hey, we aren’t making as much money as we used to” but really “um, we are losing a lot of money on Internet radio, and we’re going to have to change our offering in such a way that it’s going to lose a lot of its great diversity of programming at the very least or that it’ll go away entirely at the very worst.” But it’s a tough slog and has taken a lot of convincing.
    It's nice to see someone in Ian's position willing to honestly discuss this issue.

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    The music industry's view of internet radio

    Broadcast consultant Mark Ramsey:
    The music industry doesn't care if a zillion websites play their product online. They care that a handful of megasites do - and pay for the privilege. They care that if the Internet becomes the medium by which their content is monetized, then the only folks still standing who can afford to offer their content are the ones who can monetize it.
    Lots of interesting comments to this article worth reading as well.

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    Thursday, June 21, 2007

    Wall Street Journal: Web Broadcasters Plan Protests Over Royalties

    Wall Street Journal reports:
    Music fans tuning into their favorite Internet radio stations next Tuesday might hear nothing but silence.

    Web broadcasters are planning to turn off their music for the day to protest higher statutory royalty rates payable to artists. Some of the largest services, including Live 365 Inc., Pandora Media Inc. and Yahoo Inc.'s Yahoo Music, are participating in the blackout, which organizer Kurt Hanson of online-radio service AccuRadio has dubbed "Day of Silence."

    Alas, AOL and Clear Channel aren't participating. AOL was originally going to support it, but the executive management said no. (Apparently they didn't want to piss off their subscribers and XM.) Although it makes you wonder: AOL and Clear Channel say they can't afford the new streaming rates, but then they go on to say they can't afford to turn their streams off for a day?!

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    Friday, June 15, 2007

    SoundExchange board member: "I sincerely am starting to hate the Internet"

    Great quote today in the LA Times by Jay Rosenthal (SoundExchange Board Member and co-legal counsel to the Recording Artists' Coalition):
    To some this may sound crazy, but I sincerely am starting to hate the Internet. I know you see the Internet as some incredible invention that has opened the door to unlimited distribution of music—and your lofty goal is to bring music to as many as possible. But all I see is a tidal wave of artist abuse. And the thought of webcasters emulating the Groskters of the world, and being given a free pass just reinforces my view that the Internet is not becoming a beacon of light, but a cesspool of darkness. I don't think it is overstating it by concluding that illegal file sharing is the direct cause of the greatest campaign of copyright infringement in history, and has resulted in the music industry's being devastated.
    They hated the cassette recorder. They hated the CD Burner. Soon they'll hate people who hum songs.

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    Wednesday, June 13, 2007

    PBS looks into the shaky future of internet radio stations

    In "Radio Paradise Lost?," NOW on PBS looks into the shaky future of Internet radio stations pending a decision to dramatically increase royalty fees on July 15. Will it begin to drive these often small, independent outfits -- including some of you --- out of business? Please feel free to direct your users, listeners, and other followings to see the report for free as it aired on Friday, June 8

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    Saturday, June 9, 2007

    The SoundExchange Billion Dollar Administrative Fee

    (While this won't affect SomaFM right now, it does affect many mid-sized broadcasters like Pandora and Live365; and it will affect future personalized SomaFM stations we're working on.)

    c|net: ``When the CRB decided earlier this year to change the rules for Internet broadcasters, it also decided to levy a $500 minimum annual fee per Internet radio "channel." ... But since some of the larger Internet radio services potentially offer their listeners hundreds of thousands of unique "channels" (RealNetworks' Rhapsody offered more than 400,000 in 2006 alone, according to a company spokesman), the companies view the ruling as forcing them to multiply that mandatory minimum payment accordingly (for Real, that would amount to $200 million).``

    What will this admin fee pay for? One notable fee: more lawyers. And more lawsuit. They'll be able to go after all the MP3 bloggers, the music podcaters, the 5000 tiny stations in the Shoutcast.com directory who aren't licensed with SoundExchange, etc. Then they'll probably start going after all the restaurants and stores that playback background music from an iPod without paying the annual $10,000 "ephemeral" fee for business establishment services.

    Slashdot has also picked this up.

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    Friday, June 1, 2007

    Motion for stay pending appeal filed

    DiMA and SaveNetRadio.com have filed a motion for a stay pending appeal. If granted this will push back the looming July 15th payment deadline.

    PDF of Filing

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    Thursday, May 31, 2007

    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.``

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    Wednesday, May 30, 2007

    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."

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    Tuesday, May 29, 2007

    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

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    Thursday, May 24, 2007

    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. :-)

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    Wednesday, May 23, 2007

    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.

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    Tuesday, May 22, 2007

    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.

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    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?

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    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

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    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

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