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.

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.

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.

Save Net Radio Press Release

INTERNET RADIO MAKES A COMEBACK IN THE SENATE The Grassroots Movement to Save Internet Radio from Extinction is Reinvigorated by Senate Judiciary Committee – Brownback Offers Industry Saving Legislation

Save Net Radio Press Release

WASHINGTON D.C. – Legislation introduced in the House and the Senate last year to bring parity and equality to the new radio market made a comeback today during a Senate Judiciary mark-up. The Internet Radio Equality Act (IREA), which would establish a flat rate for performance royalty fees paid by cable, satellite and Internet radio providers, was offered as an amendment to the Orphan Works Act of 2008 (S. 2913) by Senator Sam Brownback (R-KS) during a scheduled mark-up of the intellectual property legislation today.

The amendment, which was later withdrawn, signals the renewed efforts of Net radio webcasters to reverse an unprecedented 2007 rate increase by the Copyright Royalty Board (CRB) that threatens to bankrupt the industry. Expressing his “strong support for internet radio,” Chairman Leahy welcomed future consideration of Internet radio royalties.

“It has been more than a year since the CRB raised the cost of webcasting to an untenable amount,” said Jake Ward, spokesperson for the SaveNetRadio campaign, “and all we are is a year older. Last year, more than two million people called on Congress to take action, and 150 Members in the House and Senate heard them and signed on in support of the Internet Radio Equality Act, but we still don’t have a solution. In the past year, rates have been set for net radio’s direct competition, satellite and cable radio providers, at a rate three and four times less than their proposals to Internet radio. It is disappointing and absurd that while Net radio is fighting for its survival, the industry has been put at an even greater disadvantage. This is unacceptable and hardly the good faith negotiations the House Commerce committee directed SoundExchange to participate in more than nine months ago.”

“Senator Brownback has been a staunch ally of small businesses and independent artists whose livelihoods depend on Internet radio since this fight began a year ago,” Ward continued. ”The offering of the amendment today and Senator Brownback’s leadership and dedication to equality should serve as a reminder to other Members that Internet radio and its tens of millions of supporters are not going away quietly. We should all be in this together. This continued battle is perlexing but we are committed to fighting for fairness – fairness for artists, fairness for independent labels, and fairness for webcasters. In the coming weeks and months, SaveNetRadio will be directing our formidable grassroots to support legislation that ensures artists are fairly compensated while leveling the playing field for webcasters.”

Following 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, to increase rates for webcasters by an unjustified and unprecedented 300 to 1200 percent, a national coalition of webcasters, independent artists and Net radio listeners began petitioning Congress to take action. The Internet Radio Equality Act (S. 1353/H.R. 2060), which would set the rate for all digital radio – cable, satellite and internet radio – at 7.5% of revenue, 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).

In November of 2007, SoundExchange 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. The following month, the Copyright Royalty Board, citing market constraints and a desire not to disrupt the industry, further reduced the royalty rate for satellite radio to 6% of broadcaster revenue –increased incrementally to 8% over the next five years. Cable and satellite radio generated $2 billion in 2006 while Internet radio produced less than $150 million. Under the current CRB ruling webcasters would pay an average 30% of revenue in royalty fees – and as much as 150% in some cases.

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.

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

Internet Radio Hearing this Wednesday: Call your Senator and ask them to attend!

Just found this out a bit late:

This Wednesday morning (tomorrow), the Senate Commerce Committee will meet to hold a hearing on the future of radio in the United States. Representatives from broadcast radio, music industry, and Internet radio will testify before the committee about the current state of the radio industry and how royalty fees and other issues, like competition and innovation, affect the future of the industry. This is an unprecedented opportunity for Internet radio to explain its value to Congress, and we need your help to make sure they are listening.

Call the Senate switchboard at (202) 224-3121 and ask to be connected to your senator's office. If you don't know your Senator's name, just tell them your state, and they'l connect you.

Or look up their direct number on the senate site.

Here's what you should say:

• I am a constituent, and an Internet radio listener calling to ask that as a member of the Senate Commerce Committee, the Senator attend Wednesday's hearing on the future of radio.
• Internet radio has been a revolutionary force in the music industry since its creation and now empowers artist, consumers, and music lovers of every kind. The Copyright Royalty Board's unprecedented and ill informed decision to increase royalty fees for Webcasters by more than 300% has threatened to bankrupt this important industry and we need the Senator's help.
• The real future of radio for music lovers, artists, and the music industry as a whole is online. To save this industry and allow it to prosper, there must be parity and equality between webcasters, satellite radio, and broadcast radio. Today Internet radio pays a recording royalty fee more than twice that of satellite radio, and terrestrial radio pays none at all. To fix this unfair and inexplicable inequality, please cosponsor the Internet Radio Equality Act, S. 1353, pending in the Senate today.

Details on the hearing:

Full Committee Hearing on the Future of Radio

Wednesday, October 24, 2007, at 10:00 a.m. in Room 253 of the Russell Senate Office Building

Witness List

Mr. Mac McCaughan, Musician and Cofounder, Merge Records
Chapel Hill, North Carolina 27514

Mr. W. Russell Withers Jr., President, Withers Broadcasting Group
Mt. Vernon, Illinois 62864

Mr. Tim Westergren, Chief Strategy Officer & Founder, Pandora
Oakland, California 94612

Mr. S. Derek Turner, Research Director, Free Press
Washington, DC 20001

Ms. Carol Pierson, President and CEO, National Federation of Community Broadcasters
Oakland, California 94612

Ms. Dana Davis Rehm, Senior Vice President for Strategy & Partnerships, National Public Radio
Washington, DC 20001

More Details

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?

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!

"Small Commercial Webcasters" (upper case) as opposed to "small webcasters" (lower case)

I want to take a second to clear up something: There are a group of webcasters who participated in the CRB hearings over the last 2 years. This group is known as the "Small Commercial Webcasters" group, and it is represented by Attorney David Oxenford. The small commercial webcasters include DI.FM, RadioIO, AccuRadio, Radio Paradise, Ultimate 80s and 3WK. Often times, this group is abbreviated in the press as the "Small Webcasters". Note the capital letters. Now I often talk about "small webcasters" in a more generic sense, referring to those who in the past operated under the 2002 Small Webcasters Amendment, of which there are a few hundred if these. I sometimes also refer to them as "small, independent webcasters" or just "independent webcasters". I'll be using the latter term more in the future to reduce the confusion between the SCW group and the generic class of smaller webcasters. The reason for this is that while I support the Small Commercial Webcasters group (and SomaFM has provided some financial contributions to their legal fund in the past), we are not a party to their direct negotiations with SoundExchange. However, any deal that they get will be extended to the whole class of small webcasters. We are fighting the same war, we're just fighting slightly different battles. I'm often outspoken and I say things that some members of the Small Commercial Webcasters don't completely agree with, and I want to make it clear that I don't speak for them. So when you hear me try to rally smaller, independent webcasters, keep in mind that I'm not speaking on behalf of of David Oxenford's Small Commercial Webcasters group. I have a ton of respect for David Oxenford and the parties to the SCW negotiations, but I don't want to see my outspoken views negatively affect something they're doing. I also want to make sure that people understand that I'm not rallying the Small Commercial Webcasters; they have a board who makes their decisions. While I often talk to members of the SCW and am more than free with my suggestions on how they act, I have no direct influence over how the group acts.