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Save Internet Radio
Thursday, April 19, 2007 Rate Hike Concerns Voiced at South by Southwest 2007OutboundMusic displayed at the South by Southwest music festival last month, the largest independent music festival in the world. We had a good time, met a lot of people, had some fun, promoted OutboundMusic.com and promoted all our artists.
There was a lot of talk at the festival about the most recent statutory Sound Performance royalty rate hikes for digital streaming (Internet and Satellite Radio).
Here is some historical perspective:
In 1999 Mark Cuban and his partners sold broadcast.com to Yahoo for $5.7 billion. It was Internet-bubble times, and Yahoo saw great possibilities for Internet streaming; both audio and video. Mark helped frame a deal with the Recording Industry Association of America (RIAA) for the use of music content, but he left Yahoo before the deal could be signed or implemented. Since then, Mark has said that he framed that deal specifically to drive competitors out of business. That deal, that very same model, was what the RIAA proposed to the copyright office and what the copyright office at first somewhat accepted and now pretty much fully accepts. When digital performance royalty edition 1.0 first came out a few years ago, it was met by popular and then congressional resistance. So we got edition 1.1 which was the equivalent of edition 1.0 with somewhat reduced rates. Recently the copyright office accepted the recommendation of SoundExchange to increase the royalty rates and eliminate any revenue bases for the rates-edition 2.0 is pretty much the original 1.0.
How high are the rates? For 2007 it is set at $0.0011 per performance per listener and by 2010 it increases to $0.0019. That might not sound like a lot but here's a quick comparison. If you averaged the Arbitron ratings for the seven Clear Channel radio stations in Houston for this past year, then knowing the size of the metropolitan Houston market, you can calculate the average number of simultaneous listeners. Dividing that number by Clear Channel's overhead for those stations (I'm on the board of a Houston community radio station and can ballpark that number) gives you the amount it costs Clear Channel to deliver content to each listener.
That amount is about $25/listener/year. An Internet Radio channel with similar content will owe SoundExchange $155/listener/year just for licensing in 2007 and that amount will increase to $267/listener/year by 2010. The vast difference in the way these mediums are treated creates an environment that puts Internet radio at an insurmountable economic disadvantage to traditional broadcast radio.
So what is SoundExchange and where did it come from? SoundExchange is a nonprofit organization originally structured by the RIAA and peopled mostly by friends of the RIAA. It was anointed (with some changes in how it was staffed and governed) by the copyright office to administer digital performance royalties. Charitable it is not; about 50% of what SoundExchange collects in royalties, it keeps to run the organization. I was informed by Barrie Kessler, SoundExchange COO, that the organization has an 18-position board is 50% artists and 2/3 of the board members are Indie-centered. I must not have heard her correctly. With the help of Google, I counted eleven of the eighteen members (61%) with strong RIAA connections. Many of the remaining seven are attorneys whose client lists are not public, and only a very small handful of the board members could be considered active artists by any reasonable definition. A source attending SXSW who had worked for the RIAA told me that SoundExchange and the RIAA regularly hold joint strategy sessions.
It appears to me that we have a major-record-label controlled entity with gatekeeper power over Internet Radio. It's not really about proper and fair royalties. It's about the major labels deciding who gets airplay on the Internet through the use of unreasonably high statutory royalties to force competition out of the market-many Internet Radio stations working with the majors will have sweetheart deals which reduce their commitment or exempt them completely from paying the fees. Sound familiar?
There is nothing illegal in what the majors are doing (at least in this case-there is the payola scandal and the for-promotion-only CDs ending up being sold at flea markets with artist royalties being held back to cover breakage). It is a business strategy most MBAs would embrace for companies producing widgets. But it's not good for the music industry. It's bad for the fans, bad for the artists and bad for music diversity.
These hikes don't affect OutboundMusic. We have sweetheart deals with our artists so we can effectively promote them. We encourage independent artists to get as much airplay as they can on other Internet Radio stations. It's good marketing and about the only medium where they can get regular airplay-until those Webcasters are driven out of business. I'm talking about the issue because it hurts the industry in general and music diversity in particular.
OutboundMusic is proud to partner with the SaveNetRadio coalition and we kindly ask everyone who has a stake in seeing Internet radio succeed, from listeners to Webcasters to artists, to join the coalition and sign the petition on this site to help fight for Internet radio.
posted by savenetradio # 7:13 AM
Comments: Hello! My name's Reginaldo and I'm Brazilian.
Everyday I listen music in Pandora (www.pandora.com). I like it very much, 'cause i know I am listening what people around the world listen, then we can be sintonized and - who knows? - helping ourselves to do a better world, not even listening music, but sharing experiences and building something better for this crazy world.
I think it's right to charge a royalty by the musics. But this price is too expensive to their proposites. Someday the big recorders will learn what is a world made by people, not money.
That's all tonight.
# posted by Nepomucký : April 19, 2007 5:02 PM I'm a Live365 broadcaster. But I'm from México. What can I do to keep helping?
I don't want to keep sending e-mails to the Congress with fake U.S. addreses.
Thanks. Sorry for the bad English.
# posted by Huicho : April 19, 2007 6:03 PM Here's a thought. I don't know if it will work, but here's the idea.
Would it be possible to offshore the hosting of the radio stations. If this is a US only initiative, hosting somewhere like Cayman might exclude the need to pay these royalties.
Also it may be an idea to get an investigative journalist to look into this matter and get some national and international publicity, and ask lots of questions, and disclose financial records, and make lots of greedy accountants look very shady.
Hope this helps ;-)
# posted by David : April 20, 2007 3:06 AM first of all I wish to tell that I have been tuning in to net radio from India. It is for me the only source of entertainment or moreover music is my life, if this commerciallization continues, we are heading for our own downfall... Lets put all the intellect, wisdom, creativity aside - just replace it with dollar bills. Thats what you want to see??? How am I supposed to listen to bands that feature in the net radio thousands of miles away in India? Dont you think, this is unifying the globe REALLY??
# posted by sushant : April 20, 2007 4:06 AM Dont know if this City would care about that kind of problems, but I'll give it a try.
I’m also making conscience to my listeners and making discussions on my Website.
I will keep trying.
# posted by Huicho : April 20, 2007 10:21 PM Live365 listener here in California. For me it's a little ambiguous when reading the CRB decision on how royalties fee are calculated and how traditional radio station are getting off easy. So, I did the math, hopefully correct. Broadband and broadcast radio is not that far apart that someone could not make it so you are comparing apples to apples. Therefore, using Armitron to determine listener ship most large city station are getting 3%-5% market share and according to CRB testimony would pay $8000 per year in royalty fees. Converting this into the Aggregate Tuning Hours (ATH) used for calculating Internet royalty fees, means that an Internet radio station will need to average logging 1,135,555 hours per month. At Live365, I found a classical station logging half those ATHs and by the CRB ruling would have to pay $5760 for 2006, $7920 for 2007, $10,080 for 2008 and by 2010, assuming they are still broadcasting online, $13,680 when a comparable traditional station would pay approximately $4,300. It would appear that a fair royalty fee structure would need to target the 0.0008 ATH rate by 2010 not the 0.0019. This is the argument I plan to make with my representatives and I hope it make some dollar and sense.
# posted by steven : April 21, 2007 5:06 AM I say it's time for a modern-day Boston Tea Party. What if we all just kept broadcasting? Let them spend some of the money their taking out of our pockets for the privledge of enjoying music to take us all to court. Is this similar to the file sharing issue, in the sense that they try to stop it through litigation but ultimately the technology still evolves and millions of files are "shared" everyday. Is it 'pie in the sky' to believe that if we all stand together and just don't pay the ridiculous fees that our defiance will keep the fight going. I think its imperative for us all to be live and continuing to broadcast on May 15th and beyond. I'm sure I am naive about the legal logistics but this is just a thought.
# posted by kdickel : April 21, 2007 6:25 AM The major labels are just cutting off their collective nose to spite their face. By putting internet radio out of business in the US, they would only destroy the current revenue and any possible future revenue. It would only create more costs for themselves in trying to pursue the punitive retroactive rates. It would encourage more of the piracy that is already making a massive slash in the revenues of the major labels.
The audience is leaving the major labels in it's dust as it moves on, and only in bitterness is that industry trying these punitive acts of desperation.
# posted by Sir : April 21, 2007 9:05 AM All the nations are allowed the Internet radio. High Royalty will increase affects for everyone, especially for musicians. That can be reduce the number of concert. I STRONGLY DISAGREE THE SHUTTING DOWN THE NET RADIO.
# posted by minatomirai : April 21, 2007 11:35 AM I don't get it!
This will make everyone go indy, right? This will make indy big, right?
What is so bad about that? The big stations will still be around so anyone can still listen to the same ol mainstream stuff and you can also hear it on the local radio stations anytime you like.
So the little stations have to get creative and go indy, so what?
I'm an Indy broadcater and this will be the best thing that ever happened to internet radio!!!!
# posted by brad : April 21, 2007 2:18 PM How does all the little stations that force ads through their players help the artists? They are geared to help themselves only!!! They don't care about the music at all, they just care about what's most popular and what will bring them more income.
Only the indy stations care about promoting their artists and their music as a whole and not just the popular songs!
Losing all the crappy little greed machines will not hurt the industry, it will make it better!!!!
# posted by brad : April 21, 2007 2:30 PM Hi, I'm a Live365 broadcaster. Currently about 85% of our artists are independant, we feel strong about the ability to continue to air these artists. We plan on sending a letter to the other artists explaining why we can no longer afford to air their music.
I have no clue what's going to happen
# posted by RadioGuy : April 21, 2007 5:17 PM This post has been removed by the author.
# posted by Experimental Rock RULES : April 21, 2007 10:58 PM Some earlier posts missed the point regarding effect on the true Indie sceene.
CSR Radio station ONLY airs Indie, commercial free. There is no revenue flow. In fact it's viewed as a hobby since people dump money into those without expecting a return.
Consequently, listenership is a fraction of a station that plays mainstream. Our plan, before all this crap came rolling down, was to begin mixing in the unknowns with the similar genre of commerically successful acts.
See how that HELPS Indies? To spell it out, Larger listenership HELPS! 301 listeners beats 1 (one) listener when trying to turn people on to a new Artists.
No this most certainly is NOT the best thing that ever happened to Indie, quite the reverse.
Big Corporation, Major Labels, Artists who're part of RIAA, are shooting themselves in the foot. Bleed and limp for all I care. But stupidity has it's consequences, for all in this case.
Who suffers? the music fan, music consumer, musical diversity, any chance of new Indies gettting proper exposure and a shot at success, and the demise of some of the best "mom and pop" webcasting sations ever.
Get used to being force fed the limited selection that record company geezers choose to cram down your throat. Their first part of their plan appears to be working.
Sorry, wish it wasn't going down like this.
Thank SaveNetRadio.org no matter who you are or what you think.
Brett Beatty
CSR Radio
Program Director
Online Air Personality
Chemistry Set Records
# posted by Experimental Rock RULES : April 21, 2007 11:01 PM Time tells all!
But there's no place to go but up for indy stations!!!!
# posted by brad : April 22, 2007 6:59 AM Well i have the same question as huicho. I live in Portugal and listen to Pandora all the time... Since i´m not an american but still fear the outcome of these opressive, corporate driven measures, i would like to find some other way to help out. I hate big record labels; in my country 1 cd costs 20 euros,average. I only buy cds from bands i really like, the internet provides a huge collection to hear and discover. I havent bought 1 less cd because of the internet. I really think that these kind of measures are a way to unrightfully apropriate a "media" type that those record labels didnt want to exist.. If u cant beat it, BUY it. Only a band that owns a label (and already huge amount of success) is worried about people listening to their music without paying (listening, i said. its even scary...). Every other thanks that internet radio exists. I believe Pandora to be the type of comunity that can still fight the especulation going on the music business. I have lots of friends in bands, i buy their cds because i like them and wnat to help; but when i buy those cds, how much is really used by the band? Im thinking about giving them the money myself...
# posted by Rui : April 22, 2007 8:35 AM I don't think yall understand. The big stations and pop music will not go away. Only the small stations that exploit your clicks for advertising money. That means there will be more traffic for the indy stations that truly help the musicians and give more to the listeners.
This is a move for the best!!!!
The only ones that will suffer are the ones that are making good money right now by forcing ads in your player and blasting you with on-air ads.
Indy stations are less commercial and bring you a wider variety of music. They also directly help the musicians and you by providing you with the opportunity to buy less expensive music and even communicate directly to the artists. Some of our artists even DJ for us and spend allot of time with their fans.
Yall have been made blind to the facts! Popular music will not go away or become harder to find!!!!
# posted by brad : April 22, 2007 9:27 AM The only one's crying are station owners! Don't buy into it. They say SAVE INTERNET RADIO but what they mean is SAVE MY PROFIT MARGIN!!!
# posted by brad : April 22, 2007 9:43 AM Hi I got Tim Westergren's email and ask another bloger to post over. hope it helps. and I am living in Melbourne. when I fill in the form http://capwiz.com/saveinternetradio/issues/alert/?alertid=9631541
it seems getting wrong. is this have to be the listerer whos living in USA could apply the form?
# posted by .OZ. : April 23, 2007 6:54 AM Hello, My name is Ron Maxwell with Community Net Radio in Southwest Florida USA. Has anyone challenged the very basis of what defines an actual listener that we are to pay royalty fees for? In other words, based on my limited study of a typical 9-5-office listener, Internet radio is passive at best. The volume is usually kept very low and there are lengthy times throughout the day I have observed that listeners are either on the phone or have left the area while the Internet station plays without anyone listening. This new ruling assumes that everyone is listening 100% of the time, and so we are charged accordingly. Does it make sense that studies should be conducted by webcasters as part of our challenging the very basis of these new royalties fees?
# posted by OnlineAudio : April 23, 2007 8:39 AM Let the emperor have what's his!!!
Simply go indy and you no longer need to pay any fees or go by their stupid play rules.
If you have a good station that the artists and listeners believe in, you can get the artists or their reps to sign waivers so you don't have to pay fees or go by the DMCA play rules.
I know, this is harder than just buying a CD, ripping it, and airing it. You have to request it, and the artist has to approve of what your doing before they'll allow you to represent them, it's better for everybody that way!
You can then directly promote the artists and play what the listeners truly want to hear, when they want to hear it.
GO INDY!!! Down with licensing fees!!!
# posted by brad : April 23, 2007 8:57 AM This message is mainly for Brad.
We are an indie only broadcaster and members of the SaveNetRadio coalition. This ruling will ultimately hurt indies. People still want to listen to the oldies, the mainstream and the familiar songs they've come to know and love. There is nothing wrong with that! So services like AccuRadio and Pandora have great business models. These services play a lot of indie music. And the indie music is being mixed in with more familiar classics. That gives the artist a much larger audience. Frankly, your average Joe is not interested in hunting down new music. There is a fairly large and growing population of indie music seekers, but nothing to compare with the mainstream listening audience.
If only we can get this mainstream audience to hear some of this great indie music, new favorites will be established.
We encourage all of our indie artists to get airplay on as many radio stations as possible. It's good for them. Our listening audience is growing, slowly and steadily, but it's nothing like the audience of stations like Pandora, AccuRadio etc.
We also depend on radio advertisement for revenue. We can't think of a better way to support our business while giving the artists the great rates we offer on distribution. We couldn't offer the great consignment rates without an advertisement revenue model. So, the argument that all indie radios are commercial-free is unfounded. These radios must get their revenue from somewhere. They're either taking it from the artists they promote, the customers listening or from advertisers.
As for the ruling, I have more than one opinion of why that is wrong. First, I think the concept of even requiring license for internet broadcast is wrong. Terrestrial radios don't pay this. It was determined years ago that no such license would be required because the broadcast is PROMOTION of the music. It should be the same for the internet, but about 5 years ago, the RIAA lobbied to get this license enacted.
Now that there is a license, they want to raise this rate to a level that NO ONE can afford. Even the big internet radios will be sunk by this UNLESS THEY HAVE A SWEETHEART DEAL with the Majors. And that, Brad, is their plan. Already, Slackers radio has a sweetheart agreement with the majors so they don't have to pay the license for broadcasting major label music. Slackers doesn't play much indie music either.
And that's just how the majors want it. They will make sweetheart deals with radios who will broadcast their music exclusively, or almost exclusively.
And the majority of listeners still want to hear the old familiar songs.
If there must be a license, then the payment should be based on station revenue. This would be fair for all concerned, if there must be a license at all. Again, broadcast of one's music is promotion for that product, so I think the license is unnecessary.
At OutboundMusic, we have come up with a model to compensate our artists, and it is based on radio revenue. But most of our artists are just happy to have the promotion. It exposes their music and then they start seeing sales. It's advertising for them.
# posted by OutboundMusic : April 23, 2007 10:00 AM This post has been removed by the author.
# posted by Guido : April 23, 2007 7:15 PM This post has been removed by the author.
# posted by Guido : April 23, 2007 7:23 PM This post has been removed by the author.
# posted by Guido : April 23, 2007 7:28 PM Hey Brad, Indie music isn’t protected. The CRB goes out to all material that is copyrighted including Indie music. Who ever owns the copyright on the music whether it be the song writer, artist, or label company, us broadcaster will have to still pay royalty’s on it. So in short India and main stream are both in the same boat. Listen to the conference that was posted here back on April 19. There are several Indie people in that conference that made statements that the CRB ruling is going to effect them as well. I am a small broadcaster myself and I mostly play main stream music from yesterday to today. Also the stuff I play is music that had a hit at one time and now there gone and the FM/AM stations have forgot about them. I also don’t make any money at this and I pay for everything out of my pocket.
# posted by Guido : April 23, 2007 7:30 PM Post a Comment
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