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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Monday, September 29, 2008

NAB drops opposition to HR 7084

I just got a call from Dennis Wharton at NAB, who told me that the NAB is now supporting the bill.

From what I'm reading on cnet and a few other places, NAB was concerned that they wouldn't get their own deal in time and didn't want to have web-only broadcasters get an unfair advantage over them. But a compromise they asked for was simple: extend the date of the bill to Feb 15th, 2009, and they're all for it.

No problem! The date extension is useful to other groups as well who are trying to negotiate deals, and the only possible opposition of the date extension would possibly be SoundExchange- just because they want to see this settled ASAP and not to continue dragging on.

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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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Friday, September 26, 2008

Webcaster Settlement Act of 2008 introduced

DiMA and SaveNetRadio announced that H.R. 7084: “Webcaster Settlement Act of 2008” was introduced, and clears a path for private negotiations to continue while Congress is in recess.

Basically this bill says: when the parties agree to a settlement, the CRB publishes it in the Federal Register, and it becomes an option qualified webcasters can elect, by re-wording the Small Commercial Webcasters provisions from 2002 to be applied to all webcasters, and for the period of 11 years from 1/1/2006.

So effectively, this will allow any SoundExchange settlement to be codified, and apply to all sound recordings, not just those represented by SoundExchange. I think is a good thing.

Trade organization DiMA (who represents the larger internet broadcasters like AOL and Pandora) says:

This bill does not affect the scope of performance rights or any underlying copyright law, and it does not impact broadcasters. It only clears the path for private negotiations to continue while Congress is in recess. It is scheduled to be considered today under Suspension of the Rules in the House.

I just spoke with John Simson and he confirmed that SoundExchange supports this as well.

Kirt Hanson in RAIN says ``H.R. 7084 is a bipartisan bill introduced by Congressmen Inslee, Conyers, Smith, Berman, and Manzullo and apparently supported by SoundExchange, the RIAA, NPR, and DiMA. It is scheduled to be considered today under Suspension of the Rules in the House.`` http://www.kurthanson.com

Here's the Save Net Radio release:

WASHINGTON D.C. –Today, Congress introduced legislation that will provide critical life support into the negotiations regarding the drastically increased performance royalties for Internet webcasters. H.R. 7084, the Webcaster Settlement Act of 2008, authorizes SoundExchange, on behalf of copyright owners and performers, to negotiate an alternative royalty agreement before the end of the year with any Internet radio service. This legislation will benefit all webcasters, including NPR, college webcasters, small webcasters and broadcasters who put their stations on the Internet. Because Internet radio royalties operate under a government license, Congressional authority is required to allow any negotiated settlement to take effect.

“Passage of this bipartisan legislation will ensure that the progress in negotiations over the last several weeks between webcasters and SoundExchange can continue and, we hope, lead to a solution that allows Internet radio to survive and thrive,” said Jake Ward, spokesperson for the SaveNetRadio Coalition. “The SaveNetRadio coalition, and the thousands of webcasters, artists and Internet radio listeners it represents, thanks Reps. Inslee, Berman, Smith, Conyers and Manzullo for their sponsorship of this critical legislation and greatly appreciates their continued attention and leadership on this issue.”

H.R. 7084 is scheduled to be considered today under Suspension of the Rules in the House. This bill does not affect the scope of performance rights or any underlying copyright law, and it does not impact broadcasters, it only clears the path for private negotiations to continue while Congress is in recess.


A March 2, 2007, decision by the Copyright Royalty Board (CRB), a division of the Library of Congress charged with establishing performance royalty rates for “digital radio” broadcasters, increased rates for webcasters by an unjustified and unprecedented 300 to 1200 percent.

Since the Copyright Royalty Board (CRB) increase royalty rates for webcasters 16 months ago, there has been an immediate and devastating effect on Internet radio services. Three of the most-listened-to services (AOL Radio, Yahoo! Radio and Pandora) have either left the business, limited listener access to their services, or announced they are likely to shut down in the near future if royalties are not significantly reduced. Just as importantly from the perspective of the artists that depend upon Internet radio, recent Arbitron data demonstrates clearly that royalty-paying webcast listening has diminished substantially since the CRB decision.

Legislation introduced last year to correct the discrepancy between Internet radio and cable and satellite radio providers by establishing an equal rate for all digital radio – cable, satellite and internet radio – at 7.5% of revenue is still pending with more than 150 Congressional cosponsors. The Internet Radio Equality Act (S. 1353/H.R. 2060) was introduced in the U.S. Senate by Ron Wyden (D-OR) and Sam Brownback (R-KA) and in the House by Congressman Jay Inslee (D-WA) and Don Manzullo (R-IL).

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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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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



"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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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

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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Thursday, September 13, 2007

No deal on the horizon

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

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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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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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Tuesday, July 24, 2007

IREA Update

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

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

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

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

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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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Notes from the Hill

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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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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Wednesday, July 11, 2007

Naked Corporate Greed

Flint Journal quoting John Simson:
"I don't see any other way to characterize this as anything other than naked corporate greed," said John Simson, executive director of SoundExchange.
When I first read this, I assumed he was talking about the RIAA and the Big 4 record labels they represent. Actually, he was talking about internet broadcasters!

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

"This legislation is a money grab by big corporations like Clear Channel and AOL at the expense of artists and labels," SoundExchange Executive Director John Simson said in a press release issued last month. I don't see any other way to characterize this as anything other than naked corporate greed. It's just not fair to artists."
This is where the RIAA is trying to mislead the public into thinking that only a few big webcasters are going to be affected by the new royalties. In reality, the big corporations who are going to be affected most are AOL and Yahoo. But they'll end up just cutting direct licensing deals with the Big 4 and the only difference will be that they play less independent artists.

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

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

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

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Representative Jay Inslee addresses Congress

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Now, I know it may surprise some Americans to know that government agencies can make mistakes, but certainly one was made here and we need to fix it, and we need to fix it quickly. On July 15, this decision will go into effect. I encourage my colleagues to look at this bill, H.R. 2060, the Internet Radio Internet Equality Act, and cosponsor it to add their voices to the choir to demand action by the legislature to fix this bureaucratic foul- up.

Obviously, this is supported by a large number of people, not just broadcasters. National Public Radio certainly has an interest in this. I know that many of my constituents enjoy it, and it is in great jeopardy tonight if we don't act. I know one station has already gone off the air because of this bureaucratic snafu. The NPR affiliate Rock Island Illinois- based WVIK served hundreds of thousands of citizens. They have switched off their Web stream because this is an economically untenable situation for them if it is not fixed. So what their constituents and their customers are now hearing over the Internet is silence. Silence may be better than some of the music my kids have listened to over the years, but it is not better than the thousands of stations and access that people have over the Internet. We want to keep that available for Americans.

I also want to say that why I think this is so important is diversity. One of the best things about the Internet is it gives you what you want, not what the broadcaster wants you to listen to. And, frankly, because of the consolidation of the industry and the radio over- the-air industry, we are hearing a lot more of the same thing over and over and over again. And some of it is great music. We are still stuck in the 1960s, many of us, and we enjoy it, but diversity and having access to Appalachian bluegrass or music from the subcontinent of India; I heard of a genre, it was basically heavy metal, hip-hop, country at the same time, and that is quite a genre. But this provides diversity for people, and they ought to have their multiple tastes enjoyed and that is really in jeopardy tonight.

Now, the other thing I want to say is that this decision will go into effect July 15, and these stations will be in great economic jeopardy beginning just in a week or so; and, unfortunately, some of them as of July 15 might shut off their streaming. Others are going to start to consider what to do. Some may consider going offshore, which is not a healthy situation for us for a variety of reasons.

But I want to assure the parties who might be involved in discussions in this that after July 15 it will not be the end of this discussion. If Congress is unable to act before July 15 and if the parties don't reach some resolution of this, July 15 will not be the end of this effort. It will not be the beginning of the end of this effort; it might be the end of the beginning of this effort, because as these stations start to shut down, Congress will be deluged more than they have already been deluged with voices of protestation exercising their right to petition their government for redress of grievances, and one of the biggest grievances people are going to have is they can't hear their radios over the Internet anymore. The 128 cosponsors we have today even before the sword of Damocles has fallen on the music is going to grow, and we are going to be back here to continue to grow this until we get relief.

So I am hopeful that the parties are talking to one another to try to reach an economically viable and fair resolution of this so that artists, performers, songwriters can continue to have a meaningful economic model, so they can continue to do their work and they will be compensated for it; that Web casters can have an economic model to allow them to stream it over the Web, and 70 million Americans can continue to enjoy the pursuit of happiness over the Internet listening to this great music. If that does not happen by July 15, we are going to be back here until it gets resolved and this chorus, this drumbeat will continue. We do not intend to let, in the words of Don McLean's song, not allow the music to die. It is, too, a part of the American culture, and I will encourage my colleagues to help out by cosponsoring this bill.

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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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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 "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.


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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Thursday, April 26, 2007

Bill Number

The bill number for the "Internet Radio Equality Act" is H.R.2060, and you can track it online.


Title: To nullify the March 2, 2007, determination of the Copyright Royalty Judges with respect to webcasting, to modify the basis for making such a determination, and for other purposes.

Sponsor: Rep Inslee, Jay [WA-1] (introduced 4/26/2007) Cosponsors (None)

Latest Major Action: 4/26/2007 Referred to House committee. Status: Referred to the Committee on the Judiciary, and in addition to the Committee on Energy and Commerce, for a period to be subsequently determined by the Speaker, in each case for consideration of such provisions as fall within the jurisdiction of the committee concerned.

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