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.

It's still Payola

From the Pittsburgh Post-Gazette:

In the past, the radio industry was plagued by payola scandals: Stations took money from record companies in exchange for airplay. Now, a group representing recording artists is seeking to turn the pay-for-play strategy on its head: It wants radio stations to pay artists and their record labels when the stations play their music.

What they don't mention is that record labels who want to promote artists will be able to waive these royalty fees if stations agree to feature their artists and releases. Suddenly, we have a legal form of Payola available again.

While I agree that it's only fair for broadcasters to pay reasonable royalties for the sound recording of the music they use, I don't think that exemptions should be allowed on a track by track basis.

With BMI, ASCAP and SESAC (who license the underlying composition of the song) you can't "opt out" of paying the royalty; you have to pay it no matter what. It should be the exact same way with the sound recording royalty.

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?

Artists and labels seek royalties from AM/FM radio

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

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

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

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

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

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

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

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