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| The Unrelated Segments |
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| The Music Machine |
The expiration of the Webcaster Settlement Act has left many small webcasters facing a steep increase in royalty rates and unsure of their future survival.
We support fair and transparent payment to artists and rightsholders when their work is used. We also recognize that small broadcasters are vitally important to musical culture, whether it’s small community FM stations or online webcasters who program niche music and artists you might not hear elsewhere. Commercial FM radio is increasingly focused on narrow repetitive playlists due to consolidation in station ownership. By contrast, webcasting reflects far greater diversity—from cutting edge releases by contemporary artists to America’s rich and varied musical traditions. And unlike commercial FM, internet radio pays musicians and labels.
We believe artists and small webcasters are on the same team. Let’s keep it that way!Also, if you have thoughts, from a word to a couple of paragraphs, about what internet radio means to you, in particular with regard to discovering new music, please share those in the comments. It will be helpful if we can present your feelings with SoundExchange and the CRB.
We’re optimistic that a solution can be found to allow many small commercial webcasters to continue to operate, and ensure that great music continues to get played and artists continue to get paid—directly, transparently and fairly.
The music industry stuck their heads in the sand about the pros and cons related to the digitization of music in the 1990s, conducted their affairs in an atmosphere of fear and lack of understanding, and many bad decisions resulted. The power in the music industry is now shifting from labels to artists and managers. Now that we have more control, let's be careful not to make similar mistakes because we're approaching the discussion from that same vantage point of misinformation and fear.The starting place for this argument shouldn't be "streaming services don't pay enough for the use of music," but "thank goodness the future of music now, as opposed to in the days of Napster, includes artists getting paid for the use of their music!"
In a column today about the ongoing judicial appeal of the 2006-10 CRB royalty decision, San Francisco-based MarketWatch columnist Therese Poletti writes, "The dysfunctional music industry suffers from a classic case of biting the hand that feeds it.Read the entire MarketWatch story here.
"Over the last two years," she notes, "record companies have tried to squeeze excessive royalties from Internet-radio stations — the very stations that can help fuel future digital-music sales — and it's endangering some Web-based radio firms." Poletti argues that the exposure and sales Internet radio affords and generates are benefits, not challenges to the embattled industry.
Most who are close to negotiations seem to want to stay mum about the situation; Poletti says reps of Pandora and SoundExchange didn't want to talk to her.
But Michael Spiegelman, head of Yahoo Music, is somewhat more removed, as his company recently turned over its webcasting business to CBS Radio (as has AOL, both companies citing the rising costs of licensing as a major impetus). Spiegelman told MarketWatch, "Internet radio facilitated discovery while compensating artists and labels for their effort. They may feel in the short term (the high royalty rate) gets them a better revenue stream. But in the short term, it's driving the Webcasters out of business."
Closer to the action is Jon Potter, head of DiMA (Digital Media Association, which represents large company webcasters). He says the record industry isn't even actually negotiating. "We were presented with a take-it-or-leave-it offer from SoundExchange. It was unacceptable."
Poletti, a senior columnist for MarketWatch, concludes, "I hope the appellate court is more sympathetic to the young Webcasting firms than the CRB. But the music industry never should have let their negotiations derail this badly. Once again, the industry seems to be using artists as a cover for incessant greed. Instead, they should encourage as much legal digital music as possible."
The Internet radio royalty crisis may be coming to a head, as one of the country's most-beloved webcasters, Pandora, tells the Washington Post that it is on the verge of shutting down over the issue.Read Kurt's explanation here.
As you know, the problem in a nutshell is that whereas all other forms of radio in the U.S. and around the world pay about 3%-5% of their revenues as a royalty to songwriters and 0%-7% of their revenues as a royalty to labels and performers, last year the U.S.'s Copyright Royalty Board (CRB) set that second royalty rate for Internet radio to the equivalent of 70% to 300% of revenues.
While there's a judicial appeal of this decision in progress, plus occasional negotiations going on between SoundExchange (representing labels and musicians) and various subsets of webcasters, plus bills introduced in Congress that would roll back the CRB decision, none of these fixes may happen before Pandora's venture capitalists decide to give up and pull the plug on the service.
What are they thinking?!
I've been talking to several journalists this week about the issue, and the question they always ask me is this: "Trying to bankrupt your industry doesn't make any sense! WHY is SoundExchange doing this?"
If Pandora is forced to shut down, the outrage will be huge - among consumers, journalists, bloggers, working musicians, and even Congressional staffs.
That will be the tipping point that either (1) triggers a consumer backlash against the RIAA, which, if expressed in the form of a boycott, as some bloggers have proposed, could cost the industry hundreds of millions of dollars in record sales, (2) leads to belated reasonable negotiations from SoundExchange, and/or (3) spurs Congress to pass the Internet Radio Equality Act.
But Pandora doesn't deserve to be the sacrificial lamb that keeps other webcasters alive. They're loved by millions of listeners, and they've been great for musicians, fair to labels, and generous to their fellow webcasters.
Either SoundExchange or Congress should act quickly enough to stave that outcome off.
Act 1As if that was not great enough, he tops it off with the classic Albert Einstein quote, "The definition of insanity is doing the same thing over and over again and expecting different results.”
* labels give terrestrial radio the rights to broadcast royalty-free (to generate awareness and sales of physical product)
Act 2
* labels want more promotion so they start *paying* to get the content played (payola)
Act 3
* labels told that "pay for play" is illegal and start looking for additional (free to them) promotional outlets
Act 4
* labels want more promotion so they give MTV rights to royalty-free broadcast of music videos
Act 5
* labels see other parts of the music ecosystem starting to make money (or *not* make money, but attracting users) and think "hey, that should be ours too"
Act 6
* labels start demanding/increasing payment on plays (where they used to gladly pay for such a thing and would still be doing so if the federal government deemed it illegal)
Act 7
* streaming/radio ecosystem can't afford to be in the radio business and all exit - or move to royalty free programming (talk, news, etc.) - this is in addition to MTV/VH1's continued shift to reality TV and away from music
Act 8
* labels don't have any promotional outlets to get their content heard
Act 9
* labels continue to explore new media distribution outlets for their content (commercials, soundtracks, etc)
Act 10
* due to limited inventory and increased competition to get song "placement" labels offer royalty-free content
Act 11
* go to Act 1
Ars Technica reports that EMI, one of the Big Four Labels, is considering cutting funding for recording industry trade groups -- including the RIAA.A bipartisan resolution recognizing the promotional value of free radio airplay was introduced last week in the U.S. House of Representatives. The resolution was introduced by Reps. GENE GREEN (D-TX) and MIKE CONAWAY (R-TX) and cosponsored by 51 additional members of Congress.It's nice having the NAB on our side.
"Congress should not impose any new performance fee, tax, royalty, or other charge relating to the public performance of sound recordings on a local radio station for broadcasting sound recordings over-the-air, or on any business for such public performance of sound recordings," read House Concurrent Resolution 244.
Commenting on the resolution's introduction, NAB EVPO DENNIS WHARTON said, "NAB salutes Reps. GREEN and CONAWAY and their House colleagues for formally recognizing radio airplay's enormous value to both record labels and recording artists. The undeniable fact is that radio airplay is a musician's greatest promotional tool and generates millions of dollars in revenue annually for RIAA-member companies and performers."
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 moreWouldn't it be something if the little guys finally forced a little fairness out of the big guys?
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.
David Oxenford, representing a small group of internet broadcasters, reports on the latest negotiations between the group he represents (Small Commerical Webcasters) and SoundExchange. Without stating it directly Oxenford makes it clear that negotiations over new royalty rates and related issues are going slowly and will require action by Congress.
This week SoundExchange, the organization created to disperse royalty payments from internet radio to artist, unveiled a new settlement offer to small webcasters. This "offer" is a joke. For a small webcaster looking to strike a fair deal it is completely useless.
SoundExchange is a non-profit organization created to collect royalties for artists whose music is played on internet and satellite radio. SoundExchange is not allowed to engage in lobbying.To be blunt, SoundExchange already has a job it promised to do. It isn't doing it well.This p2pnet piece, which includes the full text of Wilhelms' letter, is a must-read for those unsure of why SoundExchange is not to be trusted. Wilhelms asks SX where it got the authority to spend royalties collected on a lobbying front group called musicFIRST. musicFIRST, you'll recall, is the guise that SoundExchange Executive Director John Simson and others from SX wore at the terrestrial radio performance royalty hearing I attended last week.
"Reserving" tens of millions of dollars a year, then absorbing that money when you "can't find" the proper recipients is not doing a good job.
Setting a schedule for forfeitures of millions of dollars, and then not making any effort to publicize the forfeitures, is not doing a good job.
Being unable to explain how and why you rely on sampling to allocate royalties, and not even formally admitting you do, is not doing a good job.
Claiming that the amount of money you spend on something clearly outside the limited function you have been granted by law is "proprietary" information, is not only not doing a good job, it is a slap in the fact of the people you are supposed to work for.
Attacking the people who point out that you might be violating the law is not doing a good job.
Deducting the cost of violating the law from the money of your registered members, in open and direct contradiction to the law, is not doing a good job, no matter how many of your Directors approved.
It's August. For most of you that means warm weather and cold lemonade. For me that means it's cold and foggy here on the west side of San Francisco. Truth be told I much prefer this weather to what I experienced earlier in the week when I visited Washinton DC with some friends/colleagues from SomaFM and Reapandsow. It was hot and muggy, and each day during our short walk to the Hill I shvitzed like nobody's business. Fortunately the buildings were air conditioned...If great progress toward a fair solution for webcasters is not made by Congress’s return to Washington after Labor Day, then we plan to take expeditious steps toward passage of the Internet Radio Equality Act. We feel the Senate must take action, and we will make every effort move the Internet Radio Equality Act to the floor.Now that's what I like to hear! (Strange bedfellows, I know, but you go to the Senate floor with the sponsors you have, I always say).
Marnie Stern/ Sholi/ Crime in Choir @ Bottom of the Hill 8/3
Lee Scratch Perry/ Dub is a Weapon @ Independent 8/4&5
Violent Femmes @ The Fillmore 8/4
The Otherside
Bears
Slings
@ Elbo Room 8/6
One of BAGeL Radio's favorite San Francisco bands, THE OTHERSIDE play psychedelic shoegaze. Imagine The Byrds smoking peyote with Ride and Interpol -- the contact high is worth the price of admission. Fans of Black Rebel Motorcycle Club and Stone Roses will love THE OTHERSIDE.
All the way from Cleveland OH. -- it's BEARS, in their first-ever San Francisco show! Fans of The Shins, Peter Bjorn & John, and Camera Obscura will love BEARS' catchy indie pop.
SLINGS, an OC via Gainsville FL. band, open the show with their Yo La Belle & Garfunkel Neutral Milk wash of campfire melodies backed with acoustic guitar, xylophone, melodica, and accordian sounds.
**HIJK (CD Release)/ The Invisible Cities/ Show Me State 8/9
*The Wombats @ Popscene 8/9
Squeeze @ The Mountain Winery 8/14
*Birdmonster @ Cafe du Nord 8/18
Earlimart/ String Dream Team @ Cafe du Nord 8/23
Psychic TV @ Independent 8/24
Beastie Boys @ The Warfield 8/24
Beastie Boys @ The Greek Theatre 8/25
Mickey Avalon @ Slim's 8/28
Gogol Bordello @ The Fillmore 8/29
Crowded House @ Mountain Winery 8/29
**Music For Animals/ Magic Bullets/ Dreamdate/ Transfer @ Great American Music Hall 9/1
Brian Jonestown Massacre/ Dimmer @ The Independent 9/3
*Okkervil River/ Damien Jurado @ The Independent 9/5
*Devendra Banhart @ Palace of Fine Arts 9/7
Wolf Parade/ Holy Fuck @ Great American Music Hall 9/12
Editors @ The Fillmore 9/20
The White Stripes/ Cold War Kids @ The Greek Theatre 9/21
Low @ Great American Music Hall 9/25 & 26
Bye Bye Blackbirds/ Statuesque @ Starry Plough 9/29
They Might Be Giants @ The Fillmore 9/30
Interpol @ Gill Graham Civic Auditorium 10/20
Of Montreal/ Grand Buffet/ MGMT @ Great American Music Hall 11/12
* = I'm there
** = I'm DJing
As previously reported here, last Thursday the four mega-conglomerate major labels (under the pseudonym SoundExchange) agreed to allow webcasters to continue to pay royalties at the pre-CRB rates past the July 15th deadline if we continued to negotiate new rates in good faith. Just hours later the major labels started negotiating in bad faith by introducing an unreasonable post-agreement condition -- that webcasters invent and impose digital rights management (DRM) technology on our streams that will prevent stream-ripping (copying).
The July 15th due date for collection of the new crippling copyright royalty rates has come and gone. SoundExchange has promised not to collect these fees for an unspecified period while a fair rate is negotiated. The public statements from SoundExchange (aka the RIAA, aka the major labels) spokespeople have been inconsistent and sometimes contradictory, which is worrisome from an organization we hope is negotiating in good faith. The fact that late last week the subject of imposing Digital Rights Management restrictions on streaming media suddenly became part of the SoundExchange demands is troubling, to say the least.
Live365) have decided to continue broadcasting through this precarious period. Personally, I feel like we are still looking down the barrel of a gun -- at any moment negotiations could break down and that gun could go off.
Universal), is bad for most artists and lables. If their current strategy of hiking statutory licenses to bankruptcy levels takes root, radio of all shapes and sizes will be forced to cut direct deals with the labels. This will (a) cut the artists out of their share of monies collected, (b) give the major labels say over which stations can and cannot stay on the air, and (c) create a "reverse payola" situation by offerring certain of their artists to stations "royalty free" if the stations agree to play the labels' prirority records.
