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.

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

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.

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.

CRB sets satellite radio royalty rates.

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

AP is reporting:

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

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

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

Washington Post: Web Radio Seeks Resolution

Good article in Washington Post:

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

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

Read entire article

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.

CNN: SoundExchange spent $50,000 lobbying

CNN:

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

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

Press Release: Webcasters Stand Firm

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

FOR IMMEDIATE RELEASE:

Webcasters Stand Firm

Deal With Us In Good Faith or No Deal!

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

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

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

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

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

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

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

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

Signed:

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

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.

SaveNetRadio.org Press Release

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

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

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

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

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

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

SoundExchange extends (not very good) offer to small webcasters

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

 

Ray of Light For Internet Radio?

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

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

I encourage you to ">read the whole article.

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.

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)

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.

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.

Congressman Ed Markey jumps to webcasters defense!

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

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

Read entire story...

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

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

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

The critical piece:

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

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

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

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

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

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

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

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

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

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

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

Read the whole article here.

Online Radio: It was nice while it lasted

Eliot Van Buskirk at Wired writes:

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

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

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

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

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

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.

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.

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.

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.

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.

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.)

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?