You have to pay them to play their stuff?

SomaFM listener Robert hits the radio royalty thing on the head:

Beginning with iTunes and through that my intro to your excellent station, I was not listening to music at all. For me was impossible to listen too on a lot of levels. So you introduced me to electronica, remix jazz and the like. Well now I am looking at my purchased iTunes library with  1700 + songs. I was thinking; "You have to pay them to play their stuff?", they should be paying you for bringing them customers like me , where else am I or anybody else going to hear this. Personally I like listening to music again, Thank You!

Most of the indie artists we play feel this way, and many of the independent labels feel this way too. For the most part, it's the big labels with lots of back-catalog that don't see the value in radio play.

If the royalties we pay were much lower (in line with what is proposed for terrestrial radio), this wouldn't be a big issue. But considering that SoundExchange is now pushing for higher and higher rates, there isn't much hope of our getting a royalty rate on par with what the terrestrial guys will likely get.

Looks like our ultimate solution will be directly licensing tracks from artists and indie labels, and play less and less music from the big labels. (We already play less than 20% of our music from big labels, so that won't be too hard.)

Yahoo Launch wins appeal ruling over license fees

Newsday: Online radio service wins ruling over license fees:

"In short, to the degree that LAUNCHcast's playlists are uniquely created for each user, that feature does not ensure predictability,' the appeals court said. 'Indeed, the unique nature of the playlist helps Launch ensure that it does not provide a service so specially created for the user that the user ceases to purchase music."

This bodes well for Pandora as well, rumors were circulating saying that the RIAA was going to go after Pandora claiming it was an interactive service as well.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Doesn't seem fair does it?

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

Here's the relevant text from the bill:

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

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

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

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

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

Rusty speaking at SXSW on DMCA issues

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

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

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

Billboard: No Deal Reached For DIMA, SoundExchange

Billboard is reporting No Deal Reached For DIMA, SoundExchange:

The fact that the two parties did not reach a settlement comes as somewhat of a surprise. In the weeks leading up to the deadline, representatives from both parties expressed confidence a deal was imminent. However that changed early in the week, prior to the deadline, when talks fell apart during a conference call with all involved, according to sources. Exactly what issue sparked the fallout is unclear.

Doesn't this always happen at the last minute with SoundExchange negotiations with the internet broadcasters, both small and large?

"Pandora has threatened to shut down completely if it was forced to pay the full royalty rates, which raised the fees due to SoundExchange and other rights holders in some cases by 300%. RealNetworks previously said it would consider severely limiting the streaming radio options currently available to subscribers."

While I still don't think Pandora will completely shut down, they'll have to drastically change their service to a paid subscription service or one with audio ads every 2-3 songs.

Other deals on the horizon?

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

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

SoundExchange to small webcasters: here's your one offer. Take it or lose it.

SoundExchange continues to try and strangle small webcasters like SomaFM, RadioIO, DI.FM, RadioParadise and others. They've offered us a not very good agreement... that among other things says we can't publicly complain about or discuss the agreement, and we can't talk to Congress about anything related to internet radio royalties or copyright law, and we can't participate in the CRB process for the 2011-2015 period.

They have us between a rock and a hard place. The deadline is Sunday, but for all practical purposes, the deadline is Friday, tomorrow.

Pretty soon I may not be able to post any of this in our blog, because we're going to get forced into an agreement that will limit our audience (and hence growth) and create a serious financial drag on us and other webcasters who aren't big enough to enter into direct licenses with the parties that own the copyrights to the music they play.

SoundExchange Offers Settlement To Webcasters

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

I'm quoted in the Billboard article saying:

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

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

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

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

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

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

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

SoundExchange Royalty Update

A lot of people have asked if we've gotten everything settled with SoundExchange yet. Unfortunately, the answer is no. Basically, SoundExchange is in negotiations with some of the larger webcasters represented by DiMA. Once those negotiations have concluded, SoundExchange will then be negotiations with the small webcasters. I'm expecting that it won't be until Feb 2009 when the agreement is finalized.

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.

H.R.7084 passed in the Senate!

9/30/2008 Passed/agreed to in Senate: Passed Senate without amendment by Unanimous Consent.

Good work everyone!

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.

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!

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.

NAB opposing Webcaster Settlement Act of 2008

According to CNET: NAB, the National Association of Broadcasters, is opposing the Webcaster Settlement Act of 2008:

(CNET quoting a NAB representative) "NAB has concerns related to Congress attempting to fast-track a bill introduced less than 24 hours ago that could have serious implications for broadcasters, webcasters, and consumers of music. NAB spent more than a year trying to work out an equitable agreement on webcasting rates, only to be stonewalled by SoundExchange and the record labels. We will continue to work with policymakers on a solution that is fair to all parties."

I don't get it, you'd think this would be in AM/FM's interests as well, as it will let NAB negotiate a deal and have it codified as well. This doesn't limit deals to a single, specific organization.

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.

BACKGROUND:

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).

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.

SXSW Panel Idea proposals

I have proposed a couple panels for SXSW, which have been

Making Music Sound Better Online: Improving Flow and Presentation: Most music services present music like a jukebox, not a professional DJ. Songs stacked serially, not flowing together for various reasons: tonal balance, loudness levels, speed and intensity. We discuss improving that presentation: automated mixing and segue tools; "harmonic key mixing" tracks; improving sound quality of MP3s and alternative Codecs; audio processing systems keeping subjective loudness and tone consistent.

One thing I want to discuss on this panel is broadcast audio processing, and the FM "loudness wars", and why "loudness" doesn't really matter for internet audio but why consistent audio levels are really important. (It's one of my pet peeves, and there are a lot of big services that don't get that right now.)

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

Many people agree that certain aspects of Section 114 are obsolete. Others think the DMCA should provide more protection and compensation for creators. Some want to simplify the rules, and others think it doesn't go far enough.

Imagine we could re-write Section 114 today, knowing what we now know. How would it be different? What would be the same?

SaveNetRadio Press Release on SoundExchange's proposed rates for Cable radio services

WASHINGTON, Nov. 5 /PRNewswire-USNewswire/ -- The SaveNetRadio Campaign today expressed surprise and hope upon learning that SoundExchange has formally proposed that cable radio services pay royalties between 7.25% and 7.5% of their revenue to sound recording copyright owners and recording artists. This proposed rate, effective from 2008 to 2012, is virtually identical to rates endorsed by more than 140 cosponsors of the Internet Radio Equality Act, but rejected by SoundExchange and the Recording Industry Association of America.

"Perhaps this agreement means that SoundExchange agrees that 7.5% of revenue is a fair rate; they just prefer that the rate not be legislated," Jake Ward, a spokesperson for the SaveNetRadio campaign said. "The Internet radio industry has never asked for more than royalty parity and an opportunity to grow their businesses to the benefit of artists, consumers, and even record labels. Perhaps SoundExchange's agreement that cable radio should pay 7.5% of revenue is a precursor to an equivalent offer for Internet radio services. It is hard to imagine that recording industry interests would continue to reject Congressional legislation and webcasters' efforts to set fair royalty rates while simultaneously agreeing to the same standard for cable radio services."

The Internet Radio Equality Act -- H.R. 2060 and S. 1353 -- would vacate the March 2nd Copyright Royalty Board's decision and set a 2006-2010 royalty rate at a competitive level with royalties paid by cable and satellite radio services (7.5% of revenue.) The bill would also change the royalty rate-setting standard used in royalty arbitrations, so that the standard applied to webcasters would align with that applied to cable and satellite radio.

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

Can Internet Radio survive under current legislation?

No, it can't legally in the US.

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

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

Paul Gathard at Daily Tech says it well:

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

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

Read the whole article...

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.