It's Hollywood vs. The VCR All Over Again...

...only this time the fox is guarding the henhouse.

Keep in mind that legal internet broadcasters presently pay sizeable annual fees to ASCAP, BMI, SESAC, and SoundExchange. The fee structure already in place makes it so difficult to stay afloat that last year even WOXY.com, one of the most popular and most respected internet radio stations ever, was forced into financial ruin and had to cease operations (until being bailed out by the kind folks at LaLa.com).

The Copyright Royalty Board just substantially increased the fees internet radio sites must pay to record labels -- fees not paid by traditional radio stations -- a move that will kill off every last independent online radio station and websites like Pandora. Once these new rates kick in the wealth of programming available during what will be remembered as the Golden Age of Internet Radio will disappear almost overnight. All that will remain will be the stations and sites funded by the biggest of the big money corporations. You know, the nice folks who currently filter out all of the good music and play the same 40 songs by major label artists over and over again.

SoundExchange, arguing for the rate increase, says that internet radio provides no promotional benefit to arists. SoundExchange is made up of record label executives.

If internet radio provides no promotional benefit to artists, why do record labels, radio promo companies (hired by record labels), and bands send 30-50 CDs a week for airplay consideration on BAGeL Radio? Because I'm a swell guy?

One industry hand clearly doesn't know what the other is doing, and despite this obvious inconsistency, a government entity called the Copyright Royalty Board adopted the rates and payment structure recommended by SoundExchange despite a multitude of reasonable arguements against.

Some of you will remember that industry has tried to kill/regulate new technology in the past: the music industry freaked out about CD-burning computers in the 1990s, the film & television industries freaked out about VCRs in the 1980s, the music industry freaked out about cassette recording in the 1970s...well, here we go again, only this time the medium is so new and far-reaching, the industry remains Mr. Magoo-like in it's inability to see the big picture, and the government is so comfortably cradled deep in the warm, lush pockets of big business, that the music industry is getting it's short-sighted, ultimately self-defeating way.

Independent internet radio will die if this decision is not reversed.

Please ask your Congressperson to reverse the misguided decision of the Copyright Royalty Board. Tell them that internet radio is how you find out about new music. Tell them that when you hear music on internet radio you sometimes click over to the iTunes Music Store or Amazon or wherever to buy it, something you can't do in your car when listening to other forms of radio. Tell them that if adopted, the Copyright Royalty Board rates will kill off webcasting -- the most vital and interesting outlet for hearing new music available today. Tell them that the music industry is being very short-sighted and is effectively shooting itself in the head by crushing in its infancy this new, exciting and wide-reaching promotional outlet that it should be embracing.

Sign the petition.

Read more here and here.

Thanks.

Ted Leibowitz, BAGeL Radio
CMJ Specialty Music Director of the Year
SF Bay Guardian Best DJs of the Bay


Addendum (3/7/06): SoundExchange Executive Director John Simson said of the last time royalty rates were decided, "we had the same exact response: that this is terrible, it's going to put everybody out of business. But the industry grew."

What Simson conveniently left out is that (a) the initial response to the 2002 rates was a vast contraction of the number of internet radio stations; (b) the now-expired Small Webcaster Settlement Act of 2002, enacted by Congress, is what enabled the industry to grow. There are no small webcaster stipulations in the SoundExchange-penned new royalty rates.

The industry argument is that copyright holders should make more money from their songs being played on internet radio. Why not terrestrial radio as well? Oh, right, because terrestrial radio, with it's two decade-long slow fade into oblivion, provides promotional benefit to copyright holders, whereas internet radio does not.

Did you know that 1 in 5 U.S. consumers 12 and over listen to internet radio?

The new semi-annual study from Bridge Ratings & Research indicates the number of monthly Internet radio* listeners nationwide has jumped 26% over last year and has increased to 72 million monthly listeners from 45 million at the end of 2005.

Do you think any ClearChannel money/muscle might be involved in this push to eliminate independent broadcasters?

Since the industry can't control internet radio (and refuses to try to conquer it in a fair fight), it is trying to suck it dry. Failing that, it will pay some clueless goverment entity (whose members probably think the internet is a literal set of tubes) to legislate it out of existence.

Please don't let this happen. Sign the petition, contact your Congresspeople, and help spread the word about this to every music lover and fan of the First Amendment that you know.

Here Bill Goldsmith of Radio Paradise lays out the scenario more eloquently and reasonably than I ever could.

Addendum (3/11/07): it would appear that the major labels want you to pay for everything you hear, including radio. Hiking the royalty rates will (a) eliminate all independent internet radio stations thereby eliminating the level playing field that the internet has provided since 1999, and (b) force the remaining stations to become subscription stations. This hike will mean no more free internet radio, folks, not even Bill Gates will be able to afford to stream without charging for it. These subscriptions will fatten the fat cats, you know those nice folks who have been gouging us for $16 a CD for 20 years even though they are cheaper to produce than vinyl, and all the while cheating artists out of their earnings.