Agreement Reached on Webcasting Royalty Rates

Ladies and Gentlemen, we have an agreement.

News broke today that "pure play" webcasting services (i.e., the bigger online broadcasters who earn the bulk of their revenue through their services) have reached an agreement with SoundExchange — the nonprofit organization that collects and distributes the digital public performance royalty on behalf of performing artists and sound copyright owners (usually the labels).

Back in 2007, the Copyright Royalty Board — a smallish group of judges tasked with rate setting for online broadcasts — ruled that all webcasters were required to pay a single fee. This per-song royalty would increase to 0.19 cents per song in 2010. Webcasters responded vigorously, claiming that the fees would, in many cases, exceed their entire revenue. FMC also weighed in in the form of Congressional testimony, saying that a one-size-fits all approach to webcasting rates would have a negative impact on a crucial emerging marketplace for independent and niche music.

Since then, rate accommodations have been reached for noncommercial broadcasters' online streams — in January, the Corporation for Public Broadcasting paid $1.85 million for the right to digitally broadcast through 2010. Meanwhile, commercial terrestrial radio agreed to pay 0.15 cent per song for online "simulcasts" of their over-the-air programming, with rates set to increase each year up to 0.25 cent in 2015.

Yet, despite Congressional Acts meant to clear room for negotiation and the implementation of an agreement, there was no consensus between SoundExchange and the bigger webcasters. That is, until now.

This new agreement settles a long-held dispute between the bigger webcasters like Pandora and AOL Radio about how much they should pay. Today's agreement will see those webcasters paying the greater of 25 percent of revenue or a per-song fee which, starts at .08 cent (retroactive to 2006) and eventually scales up to to .14 cent in 2015.

Also of note: companies that offer services beyond streaming radio, such as on-demand subscription and download sites like Rhapsody (who also do streaming), will be eligible for the same rates accepted earlier this year by the National Association of Broadcasters for their simulcasts.

The reaction from all parties involved in negotiations has been generally enthusiastic. “This is definitely the agreement that we’ve been waiting for,” Pandora founder Tim Westergren told the New York Times.

In official statement, John Simson of SoundExchange said the agreement would give webcasters "the opportunity to flesh out various business models and the creators of music the opportunity to share in the success their recordings generate.”

Yet it remains to be seen whether the smaller webcasters will sign on. Billboard has more:

First there's the cap on songs streamed, which for 2009 is based on aggregate tuning hours of 8 million. That's up from the 5 million listed in an earlier offer that small webcasters largely rejected, and increases to 9 million in 2011, and to 10 million for the 2012-2014 timeframe. Retroactively, the cap is 7 million for the 2006 - 2008 timeframe.

Also scuttling the earlier small webcaster settlement offer was a provision for payments should a small webcaster be acquired by a larger company. In the current offer, the acquiring company would have to pay the difference in royalties for up to four years retroactively if after the acquisition the new company makes more than $1.25 million a year, or 30% of the transaction value.

We at FMC take it as a positive sign that the parties involved have an upbeat view of the settlement. Plus we're pretty psyched that we can still listen to Pandora at work and know that artists are being compensated!

Chart Attack: Who’s “Indie” When it Comes to Sales?

Digital Music News recently ran an article called “The Gray Art of Counting Indie Sales,” which underlined the confusion of tallying purchases of downloads or CDs based on the music’s “independent” classification. According to the American Association of Independent Music (A2IM), 32 percent of album sales in 2008 came from independent artists, but Nielsen Soundscan puts that number at 12.8 percent. Part of the difficulty in differentiating between an indie and a major the fact that many indie labels enter deals with distribution companies owned by the majors, such as ADA (95% owned by Warner) or Fontana (owned by Universal). As a result, major labels have a tendency “count the sales of their distributed partners, while indies like to downplay those partnerships,” according to DMN publisher Paul Resnikoff.

According to the American Association of Independent Music (A2IM), everything is tallied according to IP ownership — in other words, who owns the masters. "What makes a label an “indie'” is that its master recordings are not owned by one of the major labels," the group stated.

A2IM president Rich Bengloff tipped Digital Music News to that distinction earlier this year. "I think if you asked the man on the street they would go with the ownership criteria because it's permanent," Bengloff said.

FMC has had its own experience with trying to figure out what constitutes an indie or a major label. Over the last year, FMC has conducted research on radio playlists, released last month in the report “Same Old Song.” Since the research was designed to measure the difference in “airplay share” for songs released by major labels versus non-major labels, the backbone of the work was coding all of the labels that received any airplay between 2005 and 2008. When we extracted that list, there were over 6,000 unique record labels that received some airplay.

We ended up having 5 different codes:

• Major: the four majors and any of their many-owned subsidiaries and imprints

• Indie: Following A2IM’s lead, we considered an indie label as one independently owned/that controls its own masters and seems to be responsible for its own radio promotion. Even if the indie label had a distribution deal, we classified them as “indies” since distro deals usually focus on getting songs into retail as opposed to getting airplay on radio.

• Disney: including its imprints Lyric Street, Fearless and Hollywood Records. After completing some early data analysis we discovered it was important to give Disney its own code since, in some formats, this one label or its subsidiaries was garnering 2-3% of total airplay. In essence, Disney has the strength of a major label, but was not part of the payola proceedings and thus needed its own category to isolate its level of influence.

• Legacy: A small set of labels or well-known artists for which their relationships to the major labels has either changed over time, or for which a major label association with radio is likely, but cannot be confirmed. Example: recent releases by The Eagles, Jimmy Buffett, Cheap Trick or Motley Crue: artists who are now putting out their own music, but who have a well-documented history of significant radio airplay while on a major label in the past. There are also some current labels in this pool, such as Tooth and Nail, that started as an indie in the 1990s, but has allegedly created a number of upstreaming deals with major labels. This is also where we put companies like Mountain Dew’s Green Label Sound, which has been releasing singles to promote the soft drink. Clearly, this is a company with a significant promotional budget, but it’s not a major label. Without additional information it was difficult to categorize them as an indie or a major.

• No label/TBD: in the cases where there was insufficient data

Even with these five categories, we had to make many judgment calls. There were cases where a label’s relationship to various major labels had changed over the years. For example, Roadrunner started as an independent but as of January 2007 is now 74 percent owned by Warner Brothers. There are other labels that have a documented upstreaming deal with the majors – such as Fall Out Boy’s label Decaydance, which has a relationship with Island – where the independent label finds a band, puts out their first record and then the major label partner can come in and sign them to a bigger deal. On the charts, if the song had a listing Decayadance, we’d code it as an indie. If it said Decaydance/Island, we classified it as a major. In cases where we could not determine with certainty, we erred on the side of independence. Needless to say, defining “indie market share” is an inexact science, and an ever-evolving landscape.

But what about unaffiliated artists who aren’t on a label – indie or otherwise? We’ve talked recently about services like TuneCore, CD Baby and ReverbNation, which, for a nominal fee, get unsigned artists “stocked” at digital retailers like iTunes, eMusic, Amazon MP3, Rhapsody, Napster and so forth. If an unaffiliated act starts “moving serious units,” to use Music Industry 1.0 lingo, how do they demonstrate this success to the wider world? For this, you probably need some kind of ranking system that the industry (and fans) perceive as legitimate.

TuneCore currently has a chart in Billboard showcasing the 25 top-selling artists who use their service. (This chart displays two types of data: top selling full albums by total earnings for the period and top selling individual songs by earnings for the period.) Appearing in Billboard would do more than make your mom proud — it actually means something to the industry. But since established mainstream artists also use TuneCore, the top spots are often already filled. For instance, Jay Z, David Byrne, Joan Jett and t.A.T.u are all currently featured on TuneCore’s March 2009 album list (as reported in May 2009). That’s some stiff competition. (Click here for a look at the most recent charts.)

Digital distributor/marketing tool ReverbNation also has charts to show which of its artists are selling the most. But unlike TuneCore’s Billboard chart, which lumps all musicians irrespective of genre into a single top 25 listing, ReverbNation breaks its lists down by not only style of music, but also by location. You can find the top selling albums/songs from musicians from US or even the world,, including your own backyard. (Similarly, TuneCore’s iPhone app uses a geolocator that tells you the 25 best selling TuneCore songs based on your exact zip code.)

Keep in mind that all of this is based on downloads. While digital sales might currently be a better indicator of “success” than MySpace plays, there isn’t (to our knowledge) a chart that measures on-demand listens where you don’t keep the digital file. As people grow more accustomed to “accessing” music as opposed to owning it, accounting for online plays could become increasingly important.

As more artists go direct to fans and label roles evolve, all of this gets a bit fuzzier. Will everyone eventually be wading in the same digital pool? Do standard chart measurements even apply in a world of limited-edition physical items, on-demand streams and (potentially) legal filesharing?

For a lot of musicians, having people at your shows and moving some merch is achievement enough. But we’re curious: what do you think counts as success with recorded music? Feel free to let us know in the comments.

Performance Right Insights

If you're new to the whole concept of who gets paid when you hear a tune on terrestrial radio, here's the situation in a nutshell:

Currently, when you hear a song on over-the-air broadcast radio in the US, the composer/songwriter/publisher are compensated for that "public performance" via ASCAP/BMI/SESAC, but the performer and record label are not. Meaning, if you hear Aretha Franklin’s classic version of "Respect" on the radio, the songwriter (in this case, Otis Redding's estate) and the publisher receive payment; the Queen of Soul (and her label) do not receive any performance royalties. Check out our Public Performance Right fact sheet for more info.

Yet if you hear the same song played on satellite radio, a webcast, or on a cable music station, Otis Redding’s estate and his publisher get their royalties from ASCAP/BMI/SESAC, and Aretha and record label are compensated via SoundExchange. Why the difference? In 1995, Congress enacted the Digital Performance Right in Sound Recordings Act (DPRSA). This legislation created a new exclusive right to publicly “perform” copyrighted sound recordings via digital audio transmissions like webcasting. But this new right didn’t extend back to terrestrial broadcasts, allowing them to continue to broadcast performers’ work totally free of charge.

Now, you’ve likely heard a lot of talk about this issue in coming weeks as both sides of the debate try to make their respective cases to legislators. An array of artist and label groups have been organizing under the MusicFIRST Coalition umbrella to solidify Congressional support for the House and Senate versions of Performance Rights Acts bills. Meanwhile, the National Association of Broadcasters are once again getting vocal about their opposition to the public performance right for terrestrial radio.

We figured it would be a good time to remind our readers why this right is important to performing artists whose talents breathe life into the music you hear on the airwaves. First, let’s recognize that the United States’ position on this is an anomaly. Nearly every other industrialized nation compensates songwriters and performers for the over-air broadcast of their work — notable exceptions include Iran and North Korea. That’s not what you’d call great company.

Second, it's helpful to look at how this royalty would break down. The featured performing artist receives 45 percent of the total monies, which is paid directly to the artist — meaning it doesn't go to the record company to be held against debts incurred to the label (aka "recoupables.") 50 percent goes to the sound copyright owner (usually the label, but in some instances the artist). Finally, non-featured performers get the remaining 5 percent of the royalties, distributed through a fund administered by AFTRA and AFM. (Let’s hear it for the tambourine player!)

You'll hear a lot of hot air from the NAB about how the Performance Right is really just a scheme to fill the coffers of the RIAA — which is basically the commercial broadcasters trying to take advantage of the perceived unpopularity of this major label trade group. There are two giant flaws with this specious argument. In addition to the direct payment of 45 percent of royalties to performing artists, the Performance Right would also pay indie labels and artists, too, which represent over 80 percent of the music released in a given year, 30 percent of the retail sales and 15 to 25 percent of commercial airplay, according to a study released by FMC last week. This is why the American Association of Independent Music (and FMC) supports it.

Third: webcast stations and satellite radio pay a performance right, while terrestrial broadcasters do not. This is a competitive advantage that terrestrial broadcasters want to keep, particularly in the light of competition from other media. Yet webcasting startups have paid performance royalties to both songwriters and publishers, as well as performers and labels as a cost of doing business pretty much since the dawn of online broadcasting. So the question is, if webcasters — many of whom generate far less revenue than their terrestrial counterparts — pay a performance royalty to both songwriters and performers, why shouldn't regular radio?

FMC thinks that radio is an incredibly valuable public resource, which is why we support initiatives to expand and protect community radio, and try to point out ways in which commercial radio might repair some of the damage wrought by runaway consolidation in station ownership, which has led to homogenized playlists and a loss of local and regional identity. The other day, our "anonymous" commenter suggested that since we purport to support radio we shouldn't be pro-Performance Right. Well, we happen to believe that commercial broadcasters can be both fair to artists AND serve their local communities.

We should mention that this flurry of commenting came about because of our new study of what gets spun on radio called “Same Old Song: An Analysis of Radio Playlists in a Post FCC-Consent Decree World." This report essentially shows that indie labels still have limited access to commercial radio, even after the Federal Communications Commission issued consent decrees against the nation’s four largest radio station group owners – Clear Channel, CBS Radio, Citadel and Entercom – as a response to collected evidence and widespread allegations about payola influencing what gets played on the radio. You can check out the study and executive summary here.

In a recent blog post about the study, we heard from an "anonymous," who clearly wants to change the subject. He or she tosses out the old chestnut about how artists don’t need to be compensated for radio spins because these plays are “promotional.” This sounds a lot like the NAB soundbite that airplay increases album sales, which leads to compensation for performers and record labels. Yet, as our playlist analysis demonstrates, many commercial radio formats rely heavily on the “hits.” In the AAA Commercial format, FMC found that 49 percent of the 2008’s airplay was dedicated to songs that were released before 1999. In the AC format: 51 percent of the 2008 playlist was songs released before 1999. Urban AC: 56 percent. It’s difficult for the NAB to make the promotional argument when the majority of songs receiving spins are so well-worn. By sticking to the established hits, commercial radio isn’t promoting music — they’re just keeping people from switching the channel by sticking to the familiar.

So essentially, it’s the “same old song” for both commercial playlists, and the way they view the Performance Right. Isn’t it about time to expand the repertoire?

FMC Releases "Same Old Song" Playlist Analysis Report

Have you ever been scanning through the music rags at your local bookstore/music retailer/coffee emporium/tchotchke outlet and wondered, “why do I never hear this band that’s on the cover of all of these magazines on my local radio station?”

We’ve scratched our heads about this, too.

There are quite a few independent acts out there that are successful by pretty much any other measure — they sell out venues, play Saturday Night Live, can be heard on movie soundtracks, TV shows and commercials yet never seem to crack commercial radio playlists. After a while you start wondering if there’s a reason. Turns out there is – it’s just sort of complicated.

But don’t worry — FMC lives to sort this stuff out. To that end, we’ve just released a major new study of what gets spun on radio called “Same Old Song: An Analysis of Radio Playlists in a Post FCC-Consent Decree World.” Before we get into the results of this data-driven report, let’s look at some of the history. (If you wanna dive in, click here).

“Same Old Song” analyzes radio playlists from 2005-2008 to determine whether the policy interventions resulting from the recent payola investigations have had any effect on the amount of independent music played on terrestrial radio. Back in 2007, Federal Communications Commission issued consent decrees against the nation’s four largest radio station group owners – Clear Channel, CBS Radio, Citadel and Entercom – as a response to collected evidence and widespread allegations about payola influencing what gets played on the radio. In addition to paying fines totaling $12.5 million, the station group owners also worked with the American Association of Independent Music (A2IM) to draft eight “Rules of Engagement” and an “indie set-aside,” in which these four group owners voluntarily agreed to collectively air 4,200 hours of local, regional and unsigned artists, and artists affiliated with independent labels.

Using playlist data licensed from Mediaguide, FMC examined four years of airplay – 2005-2008 – from national playlists and from seven specific music formats: AC, Urban AC, Active Rock, Country, CHR Pop, Triple A Commercial and Triple A Noncommercial. FMC calculated the “airplay share” for five different categories of record labels to determine whether the ratio of major label to non-major label airplay has changed over the past four years.

Guess what? The number crunching indicates almost no change in station playlist composition the four years we examined. Specifically, the national playlist data showed little measurable change in airplay share from 2005-2008, with major label songs consistently securing 78 to 82 percent of airplay. There was a slight increase in airplay for indies on a few formats (Country and AAA Non-Commercial, in particular) but otherwise the data from year to year stayed pretty much the same.

But we didn’t just look at these big meta trends — we dug in and also examined airplay by release date. This showed that many formats leave only small portions of their playlist for new material, with current songs sprinkled in among well-worn hits. While such programming choices might make sense for a given station’s target audience, the outcome is that there are very few spaces left on most airplay charts for new music. Looking specifically at airplay for new releases, we found that new major label songs typically receive a higher proportion of spins than new indie label songs. Finally, we looked at the indie labels themselves, and found that only a handful have enough resources and clout to garner airplay consistently. For the remainder of indies, airplay is infrequent and modest, if it happens at all.

The fact that indies are still having a tough time getting airplay is something a recent survey of A2IM independent label members indicated in a more anecdotal way. The major labels’ built-in advantage, combined with radio’s risk-averse programming practices, means there are very few spaces left on any playlist for independent labels, which comprise some 30 percent of the domestic music market. Remember, this is after well-intentioned (if nonspecific) attempts to address this imbalance.

So what’s the take-away? How might the situation between radio and indies be improved? Our new report offers a handful of policy recommendations that might prove useful to the FCC’s oversight of the airwaves and improve the radio landscape for both listeners and the broader music industry. In particular:

1. Improve Data Collection

The radio and music industries participate in and employ some of the most robust and timely data monitoring systems available. There are private companies that measure audiences, that keep track of radio ownership transactions, market share and revenues, that track retail sales and box office grosses, and at least three services that monitor what is being played on commercial and noncommercial radio. Many radio stations, music labels and advertisers subscribe to these services so they can get up-to-the-minute information about their own activities, and those of their competitors.

In other words, radio stations are already very data rich. What’s now required is the political will and organizational capacity at the FCC to determine what questions need to be asked, how frequently, and of whom, and then to seek out or collect the information it needs to be an effective regulator. Nonprofit organizations like FMC have been conducting much of this oversight work on behalf of the public interest, but clearly the FCC needs to play a greater role. The FCC could acquire data from commercial sources, or it could request data from stations as part of their responsibilities as broadcast licensees, or some of both. Regardless of the method, the FCC needs to clarify its oversight role, then rigorously and consistently monitor what’s happening in radio in order to craft more effective policies and enhance accountability.

2. Refocus on Localism

Both anecdotal and empirical evidence indicate that commercial radio has become a risk-averse media that employs cookie-cutter formats across many radio properties. In recent months, commercial radio has also been the source of layoffs and downsizing as it struggles with both reduced ad revenue and huge debt loads racked up during the station buying spree following the passage of the 1996 Telecommunications Act.

The radio industry is clearly in crisis. Stations have lost touch with their local markets, but unfortunately, the industry seems to have responded by pushing for greater consolidation and syndication. FMC believes this is the wrong way forward, as radio’s chief advantage in the modern media landscape is “live and local.”

We join others in the media reform movement – and many in the radio industry itself – in calling for commercial radio to regain its local foothold and build programming in which serving its local community is its primary goal. We also simultaneously call on the FCC to revisit the localism proceeding and design clear guidelines about how to measure whether its licensees are honoring their obligations to the communities in which they operate.

We know that locally oriented programming isn’t as cost-effective as running a station using pre-programmed playlists and automated DJs, but it is radio’s strongest asset in an increasingly saturated media environment. FMC and our partners have engaged in pilot projects with small commercial operators to determine best practices for engagement between programmers and the independent sector to set goals and identify mutually beneficial marketplace solutions, and we hope that these projects help us to convey information that other stations can use in the future.

3. Expand the number of voices

This report also shows us that major swaths of the music economy aren’t currently represented on commercial radio. It outlines the many structural barriers to airplay for all types of labels, but for independent musicians in particular. Using other metrics to measure the profile of some indie artists, including retail and digital sales, TV appearances, large live shows, and licensing deals that place their songs in movies, video games and in ads, the lack of airplay on commercial radio for the same artists seems counterintuitive. Independent music belongs on commercial radio and is just as vital as the music currently receiving heavy airplay. Changing the prevailing culture at commercial radio will take a concentrated effort with all parties working in good faith basis; identifying structural barriers to airplay in this report represents part of this ongoing effort.

Finally, this also moment in time when the government can make a conscious effort to expand the number of broadcasters in this country. The passage of legislation to allow Low Power FM in more American towns and cities would provide local groups and organizations with an opportunity to serve their communities.

Feel free to let us know what you think!

The New DIY?

There's been been a couple of online articles recently (that's one shy of three, which almost makes a trend!) about what "do-it-yourself" means in the era of digital music. So we figured we'd do a little thinking out loud, then turn the floor over to the experts — in other words, you.

With the advent of user-friendly digital distro services, musicians now have a wide array of relatively inexpensive tools to get their tunes out there. Of course, with fewer gatekeepers and the "democratization" of technology, it also means you probably have to work harder to get noticed — there's no slick suit who can make it magically happen for you. (And if there is, maybe s/he can give us a call?)

All of this upsets the traditional artist-record company relationship, which we've seen borne out by the increasing number of established acts who have ditched their labels in favor of more "experimental" approaches to marketing and distribution. (Insert tired Radiohead/Nine Inch Nails analogy here.)

But can an up-and-coming artist really be their own label? Superstars clearly have an advantage in terms of the critical mass needed to achieve success with direct-to-fan schemes — most have already benefited from "traditional" label arrangements during their developmental phase. So what does DIY mean for the struggling artist/part time barista?

It kind of depends who you ask.

Digital Music News published a piece this week called "DIY and the Death of the Rock Star." This paragraph basically explains their take:

Major labels no longer have the ability to generate huge blowouts, thanks partly to media fragmentation. Then again, direct-to-fan relationships have never been easier to build — one dedicated fan at a time. Indeed, those that toil to super-serve a core audience can reap the rewards, perhaps enough to quit the day job.

The article also cites indie-punk-cabaret goddess Amanda Palmer, who has become quite the Twitterer lately:

. . .despite the hype surrounding DIY, big questions continue to surround the ultimate payoff for unknown acts. Either way, artists can expect to dedicate extreme efforts and lots of connected time to achieve traction. "I'm spending a lot of time connecting with fans... and I don't feel as much of an artist as much as a promoter of Amanda Palmer," Palmer relayed. "All of this instant connection has taken the place of making art. An idea that might have translated into a song before might now go into my blog instead."

The quasi-snarky music/biz blog Idolator recently published a post with the awesome title, "Is DIY Just Another Word for Nothing Left to Lose?" FMC's founders can no doubt identify with this section:

The do-it-yourself attitude, conceived out of a combination of ambition and necessity, was revelatory to a particular generation who may have grown up with punk but still saw the movement's bands releasing albums on major labels; what started as adding a lower rung to the ladder became an end goal in itself, with labels like Dischord and K insisting that DIY techniques represented a way of making music that was anti-hierarchical, inclusive, and democratic. Artists who chose to subscribe to that particular philosophy became part of a system of mutual assistance which, at least theoretically, enabled them to make music without the need for a major label's resources.

In the current age, DIY seems to have reverted to being a stepping stone to greater success, whatever that might mean. Except that, instead of being a lower rung on the ladder, the DIY rung is rapidly becoming the entire ladder, at least to hear a lot of folks tell it.

The fragmentation of traditional gatekeepers, the changing role of labels, tough economic times and rampant file-sharing are all factors in what can only be described as a major paradigm shift in the business of music. But it's not all doom and gloom: increasingly artists can make their own career choices, from DIY tour booking to stocking music with digital retailers. Although it's probably too early to predict how all his will play out, FMC is planning a study of musician income streams that will hopefully provide a clearer picture about how these disruptions/opportunities are affecting artists' bottom lines.

We wouldn't want to call ourselves prescient or anything, but the other day (before the aforementioned articles were published), we conducted a non-scientific, "just for fun" experiment with our Twitter followers. We asked them "What does DIY mean to you?" and received a ton of interesting responses. Here's a handful:

ANTIQCOOL: Freedom! no suits telling me what to release.

talegends: DIY to me means "you know you can't afford to hire anyone, so if you want anything to happen you have to DIY!"

oastem: DIY means forging your own tools to follow your vision wherever it takes you be it over/underground.

travisnorman: DIY for me = The Freedom to pursue your vision precisely as you imagine it, without compromise.

Interestingly, no one said "too much damn work." Although one person seemed to take the question a bit too literally: "DIY means 'do it yourself,'" they said. Well, we're glad to have cleared that up!

If you haven't already chimed in, tell us in the comments what DIY means to you!

Public Performance Right Hearing on the Hill

Yesterday (March 10, 2009), the House Judiciary Committee held a hearing on the Public Performance Right for Sound Recordings, which featured testimony from folks on all sides of the issue, including one bona fide rock star (no, President Obama didn’t stop by).

Billy Corgan of Smashing Pumpkins joined Mitch Bainwol (Chairman and CEO, RIAA), Paul Almeida (President, Department for Professional Employees, AFL-CIO), W. Lawrence Patrick (President, Patrick Communications), Stan Liebowitz, Ph.D. (Ashbel Smith Distinguished Professor of Managerial Economics, University of Texas at Dallas) and Steve Newbury (Chairman of the Radio Board, National Association of Broadcasters) to present their views on the Public Performance Right.

This Performance Right would pay performing artists and sound copyright owners for the use of their music on terrestrial radio. Here’s an example: if you hear Aretha Franklin’s version of "Respect" on U.S. radio, only the songwriter (Otis Redding) and the publisher receive payment; Aretha (and her label) are left out. Compare that with the situation in just about every other industrialized nation, where performing artists receive payment for the use of their work on over-the-air broadcasts.

FMC supports a Public Performance Right for terrestrial radio for a number of reasons — it would compensate deserving performing artists; it would establish a better balance between new services and traditional radio; it would create another revenue stream for copyright holders and performers, including the thousands of independent labels whose songs receive airplay every year. It would also enable U.S. artists to get paid when other countries broadcast their work. Millions of dollars of foreign performance royalties that could be distributed to US performers are currently left on the table – or go into other countries’ arts and culture coffers — because the US has no terrestrial performance right. For more information, you should check out our Public Performance Right fact sheet, and Ann Chaitovitz’s Op-Ed in Huffington Post.
This issue goes back to practically the dawn of radio. The broadcasters have long held that the airplay creates “promotional value,” which in turn drives record sales; therefore, they shouldn’t have to pay for using performers’ music. The debate has gotten even hotter in the digital era due to the fact that satellite radio, webcasters, and cable music stations pay the performer and recording copyright owner via SoundExchange, as well as paying the songwriter and publisher through ASCAP/BMI/SESAC.

Like the royalty breakdown for the digital Performance Right, the royalty breakdown for the terrestrial Performance Right goes like this: for non-interactive licenses, the featured performing artist receives 45 percent, the sound copyright owner (again, usually the label) gets 50 percent and the backing musicians and vocalists split the rest. This money does not come from the songwriter and publisher’s portion; it cannot be recouped and does not even go through the label.

It’s worth noting that Billy Corgan, who supports the Performance Right for terrestrial radio, is not only the featured performer, but also the songwriter and co-copyright owner for most of his band’s material. In his testimony, he was clear about how terrestrial radio benefited his own career, but didn’t mince words about what he sees as a skewed compensation structure. “From my perspective, this issue is one of fundamental fairness,” he said. “If the performance of a song has value to a particular terrestrial radio station in its airing, I believe it is only right to compensate those performers who have created this work. Simply put, if a station plays a song, both the author and the performer should be paid. These particular performances must have value to the stations or they wouldn’t be playing them.”

Steve Newbury, representing the National Association of Broadcasters — who have so far successfully beat back attempts to enact a performance right for radio — invoked poor market conditions and promotion for artists as reasons to keep things as they are. “Local radio stations provide new and emerging artists with needed exposure and access to a listening audience,” he said. “Record companies and their artists benefit not just from radio airplay, but also from on-air interviews and promotions of local concerts and new albums.” Yet one of the fastest growing segments of commercial radio is classic rock, which plays music that long ago passed its promotional “sell-by” date. There’s nothing saying that all music would even have to have the same rate — oldies formats might end up paying less then the stations that spin the latest cuts. The rate set for an artist’s debut might be lower than the rate for an established superstar.

It’s also interesting that whenever the Public Performance Right is discussed, the broadcasters bring up their supposed commitment to localism and diversity, which, in this era of hyper-consolidation and cookie-cutter playlists, smells a bit fishy.

As expected, the RIAA (and by extension, the major labels) took a bit of a bashing from both members of the Committee and those witnesses who are against the Performance Right. But it’s important to mention (as RIAA CEO Mitch Bainwol did in the question-answer period) that the big labels are only one segment of the industry — there are a lot of indies out there. The American Association of Independent Music — an indie label trade group — actively supports the enactment of a performance right, too.

The language in the House bill contains some notable improvements over the legislation introduced last year. First, it includes additional language to protect songwriters’ royalties and to ensure that these royalties cannot and will not reduce the amount of songwriter royalties. This is important, as songwriters depend on radio play as a major source of revenue.

It also closes an important loophole that the labels could have used to hurt performers. The current bill requires that terrestrial stations pay the designated collecting agent (probably SoundExchange) 50 percent of royalties due under any license granted by a copyright owner. The designated agent will then distribute the 50 percent directly to the artists. This provision prevents the labels from doing direct license deals with the broadcasters and collecting the artists’ portion. Unfortunately, this provision is limited to direct licensing of terrestrial stations and not internet, satellite and cable transmissions. We strongly support this provision but believe it should be expanded to include ALL direct licenses of music transmissions otherwise subject to the statutory license.

All in all, it was a fascinating hearing, even if it didn’t hint at any forthcoming compromises between factions. Head to the House Judiciary Committee site to see testimony from all the witnesses. You can also read a nicely balanced play-by-play at Coolfer.

A2IM's Rich Bengloff in Huffington Post

If you've been following FMC's work, you've no doubt heard us talk about the American Association of Independent Music (A2IM) — a forward-looking non-profit organization that represents a broad coalition of independent labels.

A2IM has gone to bat on a number of important issues, including making commercial radio friendlier to independent artists — an effort FMC wholeheartedly supports. In fact, we recently collaborated with A2IM on a report about how indie labels are still having difficulty getting airplay on commercial radio a year after the "Rules of Engagement" with major station groups. (These voluntary agreements were a result of 2006-2007 payola investigations; for more info see our Payola Education Guide.)

On January 15, A2IM President Rich Bengloff published "An Indie Music Memo to the FCC: We Need a Level Playing Field Too" at the Huffington Post. The article calls on the Commission to recognize the indie sector's contribution to the music economy (around 30 percent of all domestic music sold), and says that access to the digital marketplace is crucial to indie artists and labels. That means net neutrality — the principle that protects the open internet — must be preserved. (For more info on net neutrality and the music community, visit FMC's Rock the Net page.)

Bengloff also underscores the need to properly compensate musicians for their creative efforts:

Everyone who embraces the digital model now has access to a global market and can compete. Intellectual Property in general, and music specifically, are big contributors to our economy -- and to our culture. Making certain that open and fair access to market is maintained while supporting fair compensation for the use of music is the worthwhile and achievable goal.

That pretty much hits the nail on the head. Achieving this goal isn't exactly easy, but you can count on groups like A2IM and FMC to keep working towards it nonetheless. You could say the future of music depends on it!

Ch-Ch-Ch-Changes?

In case you hadn't noticed, there was a big ol' election last Tuesday, the results of which have Washington, D.C. (and the rest of the country, not to mention the world) buzzing. But what will a Barack Obama Administration and a new Democratic Congress mean for the music community?

We at FMC are expecting a positive impact on the music world in general. Keep in mind that we're equal opportunity wonks — our assessment is not partisan. But it is informed by the policy decisions of the last eight years, which created or maintained significant barriers to sustainable cultural communities.

There will now be opportunities to craft policies that encourage the flourishing of music across media platforms. From expanded community radio to more robust commercial broadcasting and broadband, musicians will likely benefit from more attention paid to the ways in which they reach potential audiences, and ultimately earn a living.

Check out FMC Analysis: Election Impact on Artists and the Music Community for a point-by-point look at what we think are the key areas for improvement. Then let us know what issues are most important to you in the comments field of this post.

Being Your Own Marketer

Today's post at the Copyright Alliance blog got us thinking about how today's musicians develop a fan base. The digital revolution has led to unprecedented ways to connect with potential audiences, but the landscape can be tricky to navigate.

If there's any consensus about what you need to succeed, it's probably much the same as back in the analog era. Talent (even if it's currently only your mom or GF/BF who thinks you've got it) and persistence are still your best bet. The good news is that you've got tons of tools to start convincing the rest of the world.

While there's no shortage of new technologies to promote and distribute your work, getting going can seem daunting. FMC talked about ways to get your music out there at our "What's the Future for Musicians?" events in Chicago and New York City (as well as our earlier seminars in upstate NY) — we'll be archiving the presentations online as soon as they're available.

In the meantime, here are a few interesting places you can visit to learn how to "market yourself."

FMC Advisory Board member Derek Sivers is a hero to many for having started CD Baby — a service that's helped countless indie musicians sell physical discs and get their stuff in digital stores. Derek recently sold the company, but he hasn't given up on helping artists promote their work. His site has tons of DIY tips for musicians, which he's constantly refining and adding to.

Randy Chertkow and Jason Feehan are the authors of a book called The Indie Band Survival Guide, and they also run a website of the same name. (We got to meet Jason in person at our Chicago seminar). The book you have to pay for, but the PDF that it's based on is still free. The site has tons of information about tools you can use to promote your music.

Ariel Hyatt is a publicity expert who appeared at our Big Apple event. Her main site is here. (She's also got a new book called Music Success in Nine Weeks.)

David Rose has a blog called Know the Music Biz that's full of good tips.

It used to be you pretty much needed to have a label or distributor (or spend a lot of time consigning stuff at individual record shops) to get your tunes to retail. Nowadays, you can "stock" your music with all the leading digital stores for a nominal charge. There's the aforementioned CD Baby, which includes digital servicing when they stock your physical disc (you can also opt for digital-only), TuneCore (which also offers CD duplication and marketing tips) and ReverbNation — which recently went from being just a streaming player to a full-service digital distributor.

Of course, once you've made your music available, you gotta let people know about it. Today's artists have a lot of different means to do so — podcasts and webcasts (either their own or other people's), blogs, social network sites and online "radio" stations like Pandora and last.fm. And let's not forget good-old-fashioned terrestrial radio. Indie artists may be mostly locked out of commercial stations, but there are stil plenty of opportunities with non-commercial, Low-Power FM and college broadcasters.

The bottom line is that you've got great deal more opportunity to self-promote than at any other time in history. This might mean a lot of work that doesn't seem to fit into the "rock star" stereotype of boundless leisure. But it also means more control over your musical destiny — something pretty rare in the days of bottlenecks, gatekeepers and middlemen. (If you think musicians should be able to make their own choices about how their music is distributed online, you should check out our Rock the Net campaign for net neutrality.)

Of course, we're curious: what are some of YOUR favorite means to promote your music?

Payola and Indie Access to Commercial Airwaves

As part of our ongoing work to improve the state of terrestrial radio and create more opportunities for artists to reach potential audiences, FMC has worked closely with the American Association of Independent Music (A2IM) — a group that represents a broad coalition of independent labels — to determine whether independently-released music is reaching the commercial airwaves.

Having observed trends in terrestrial radio since the turn of the millennium, we realize two things: a) consolidation in station ownership after the 1996 Telecommunications Act has led to a loss of independent owners and local control over programming decisions at commercial stations, and b) pay-for-play schemes like payola have made it incredibly difficult for non-major label talent to score commercial radio play.

While consolidation still remains a problem, attempts have been made to curb payola. In 2003, then-New York Attorney General Eliot Spitzer launched an investigation into whether the nation’s biggest radio chains were participating in payola. The answer was a resounding yes. Spitzer uncovered blatant pay-for-play arrangements, including major label inducements and a corrupt system of middlemen (independent promoters) who acted as gatekeepers to commercial programming. (You can read some of Spitzer’s published evidence here, or learn more about the history of payola and the NY AG investigations in our Payola Education Guide.)

While Spitzer's probe resulted in consent decrees and the collection of over $30 million in fines from the four major labels, it was up to the FCC to complete the investigation on radio stations. In March 2007, the FCC decided to settle with the four largest radio station groups that had been accused of engaging in payola – CBS, Citadel, Clear Channel and Entercom. Although the agency was successful in collecting small fines from the station group owners and implementing consent decrees, the FCC resisted calls for oversight, leaving no means through which to guarantee implementation or compliance. So, the independent music community – led by A2IM and FMC – helped implement a separate set of voluntary "Rules of Engagement" with the broadcasting chains. The hope was to create the conditions for a more productive relationship between the indies and the major broadcasters.

So where are we, some 18 months later?

A new survey of A2IM label members conducted by investigative journalist (and former FMC Communications Director) Justin Jouvenal found that indie labels are still having difficulty getting airplay on commercial radio.

A2IM sent out a 42-question survey to its label membership, which asked about whether their relationship with commercial radio had changed over the last year. The report, which was released on October 20, 2008, at an A2IM-sponsored roundtable discussion in New York City, revealed near-unanimous sentiment among label owners; little has changed over the last year and a half, with 92 percent of label respondents describing their relationship to commercial radio as “the same” as before the Consent Decree and Voluntary Agreements. You can see the press announcement here; read the report here; and download the full report with appendices (PDF) here.

FMC continues to research, analyze and document commercial radio play to better understand if and when independent music is played on corporate radio. At the same time, we continue to push for and support non-commercial and Low-Power FM as an alternative to the homogenized sounds heard on commercial stations. We also believe that, for terrestrial radio to be viable in the 21st century, it must reaffirm its commitments to serving the communities in which it holds licenses. In other words, it needs to think, program, and act locally. In this way, we hope to rebuild the vital connections between listeners, artists, labels and programmers so everyone can benefit from the public airwaves.

For more information on radio issues, visit our articles and research pages.

No Depression is No More.

After 13 solid years, alt-country magazine No Depression is moseying off into the sunset. Fans of the publication — which helped break the careers of artists like Ryan Adams and Wilco — are understandably bummed, as are many of the niche acts the mag covered.

This article from The News & Observer was written by onetime ND scribe David Menconi. It's a pretty good eulogy.

What's behind the shutdown of one of the most beloved rags in American music? Shrinking advertising revenue, for one. But publishers Grant Alden, Peter Blackstock and Kyla Fairchild also point to a changing media and retail environment as factors in their decision. Here's an excerpt of the announcement from the most recent issue:

Those circumstances are both complicated and painfully simple. The simple answer is that advertising revenue in this issue is 64% of what it was for our March- April issue just two years ago. We expect that number to continue to decline.

The longer answer involves not simply the well-documented and industrywide reduction in print advertising, but the precipitous fall of the music industry. As a niche publication, ND is well insulated from reductions in, say, GM's print advertising budget; our size meant they weren't going to buy space in our pages, regardless.

On the other hand, because we're a niche title we are dependent upon advertisers who have a specific reason to reach our audience. That is: record labels. We, like many of our friends and competitors, are dependent upon advertising from the community we serve.

That community is, as they say, in transition. In this evolving downloadable world, what a record label is and does is all up to question. What is irrefutable is that their advertising budgets are drastically reduced, for reasons we well understand. It seems clear at this point that whatever businesses evolve to replace (or transform) record labels will have much less need to advertise in print.

The decline of brick and mortar music retail means we have fewer newsstands on which to sell our magazine, and small labels have fewer venues that might embrace and hand-sell their music. Ditto for independent bookstores. . .

What makes the news particularly, um, depressing is that the magazine still has a loyal readership and high sell-through rates. But that's apparently not enough to offset the losses in ad revenue.

No Depression will continue to operate its website, but readers only have one more physical issue to look forward to. And the independent Americana, folk and country acts who have come to depend on the magazine for publicity will no doubt have a tougher trail to tread.

Blog Hype and Album Sales — Fact or Fiction?

A new study by NYU/Stern professor Vasant Dhar indicates that blog buzz has a strong correlation with album sales. The study looked at blog posts, changes in an artist's number of MySpace friends, and online album reviews over an eight-week period — half before an album was released, half after.

The study found that increases in MySpace friends had a slight positive correlation to album sales. More significantly, artists who received ample attention from major blogs seemed to "move more units," as they say in the biz.

Marketing budgets were also factored in, with major label artists performing better than their indie counterparts. However, artists on smaller labels could overcome this disadvantage with sufficient buzz. The magic number of blog posts to achieve online semi-stardom is apparently 240. Something to shoot for!

All of this number-crunching proves something that we all know intuitively — the more you're talked about, the more albums you'll sell. But you have to wonder about cause and effect: do better-selling albums receive more attention in blogs simply because the artists already have a higher profile? The study doesn't analyze whether the blog mentions are positive or negative, so you can't tell if blogs are truly tastemakers, or merely indicators of an artist's existing popularity.

Along those lines, the number of MySpace friends a band has may be the result of of higher real-world sales rather than the cause. And, there's also anecdotal evidence of a backlash when a band is overhyped by blogs before they even get to release an album. Indie-rockers Black Kids are an example of this phenomenon, according to snarky music-news site Idolator.

So should bands view blogs as a potentially powerful marketing tool? The results are inconclusive. But the study does indicate that blogs and MySpace have a role to play in exposure and sales. So you might wanna keep e-mailing those tunes and adding more friends.

Still Making Sense

If there's anyone who knows how to survive in the music industry, it's David Byrne. From his days on the NYC underground with the Talking Heads, to running a label and touring the world as a solo artist, Byrne has seen pretty much every side of the business. He's also revered by a younger generation of indie musicians, who look up to him as a role model of artistry and integrity.

Now he's offering his opinions on how musicians can survive in an increasingly unstable music world. Byrne recently wrote an article in Wired, entitled "David Byrne's Survival Strategies for Emerging Artists — and Megastars."

In it, Byrne suggests that the crisis facing the industry's old guard, while disruptive to a certain status quo, need not spell doom for working musicians.

“What is called the music business today is not the business of producing music. At some point it became the business of selling CDs in plastic cases, and that business will soon be over. But that's not bad news for music, and it's certainly not bad news for musicians. Indeed, with all the ways to reach an audience, there have never been more opportunities for artists. Where are things going?”

The online version of the article also features audio of Byrne's chats with forward-thinking artist/producer Brian Eno and Merge Records co-owner Mac McCaughan, as well as a link to a separate back-and-forth with Radiohead's Thom Yorke.

Byrne delivered a presentation at FMC's 2006 Policy Summit called "Record Companies: Who Needs Them?" McCaughan, too, is a Policy Summit veteran, and also testified before the Senate Commerce Committee at its October "Future of Radio" hearing.)

With so much insecurity and backbiting among the music business elite, it's refreshing to hear a more proactive response to this period of transition. Especially coming from someone as cool as David Byrne.

Trade a Song With Sufjan

This is pretty cool: prolific songsmith Sufjan Stevens is holding a Christmas contest in which participants could get the chance to own the rights to an original Sufjan composition. The catch? You gotta come up with a killer Christmas tune of your own. Kind of like Secret Santa gone indie-pop. Here's the skinny, from his label:

Sufjan Stevens is busy working on a very special gift right now, for a very special person. And in the spirit of Christmas, that person will give Sufjan a similarly special gift.

Here's how it works: write an original Christmas song, record it, and email the song to us. Asthmatic Kitty will pick a winner, and that person will trade rights to their song for rights to Sufjan's song.

Just like a gift exchange, Sufjan's song becomes your song. You can hoard it for yourself, sell it to a major soft drink corporation, use it in your daughter's first Christmas video, or share it for free on your website. No one except Sufjan and you will hear his song, unless you decide otherwise. You get the song and all legal rights to it. We get the same rights to your song. By submitting your song, you also give us permission to stream it online.

Sounds like a fairly decent trade. Interested parties should click here.

Merge on the Hill

Yesterday's Senate Commerce Committee hearings on "The Future of Radio" covered a surprising amount of ground -- everything from media ownership, to localism, to webcasting royalties. In fact, there's so much to talk about that we've created two blog posts. (This is the second!)

Senators aside, the hearing had some real star power in the form of witness Mac McCaughan — longtime rocker and co-founder of Merge Records. (You know, the 20 year-old North Carolina label with acts like Arcade Fire and Spoon?) McCaughan spoke clearly and eloquently about how non-commercial broadcasting in its many forms has made a major difference not just on his business, but also in his personal development.

“As a kid I went to sleep and woke up to the radio in an era when even on album rock radio the DJ was playing his or her favorite new records,” he said. “Then at the age of 12, college radio exposed me to music that I had never heard on top 40 or album rock stations. The music I discovered then set me on the course of making music myself and starting a record label. And since that time, as both a performer and a label owner, I have relied on radio as an essential component of the work we do helping audiences learn about our music.”

McCaughan talked about the importance of diversity, competition and localism in radio, urging Congress to “take action to allow for the growth of non-commercial radio, and the expansion of Low Power FM into more urban settings.” Certainly Senator Dorgan was in agreement — he’d earlier suggested holding official proceedings to deal with the FCC’s recent movements towards changing laws regarding media ownership, which would have an extremely negative impact on the non-commercial radio that McCaughn and so many others cherish and rely on.

“I want to urge this committee to take the necessary steps to ensure that our media landscape does not become even more consolidated,” McCaughan said. “The deregulation that followed the 1996 Telecommunications Act allowed for unprecedented consolidation in commercial radio, which has resulted in a homogeneity that is often out-of-step with artists, entrepreneurs, media professionals and educators — not to mention listeners.” Check out FMC's 2006 Radio Study for extensive documentation on the effects of consolidation.

But what about the internet? Although there was plenty of discussion about online royalty structures, the important issue of network neutrality was not explicitly examined. McCaughan made plenty of room for the topic in his written testimony, but due to time constraints, didn’t get the chance to fully speak his mind about the subject. Still, he stressed that “labels and artists should have the benefit of competing on an equal playing field,” stating that “Any policy decision that enables the reestablishment of old bottlenecks or creates a tiered internet would be a step backward.” FMC's ongoing Rock the Net campaign is a great way for bands and artists to get involved in the fight for net neutrality.

Much of the focus of the hearing remained on radio, although its actual definition was at times unclear. In his opening statement, Senator Inouye waxed nostalgic for simpler times: “I suppose radio isn’t as sexy as the internet,” he offered. “But I remember growing up on it, back when it was local.” Senator Snowe, who talked about the decline of local stations in her home state of Maine and asked questions pertaining to broadcast diversity, echoed Inouye’s comments about localism. FMC has published a media ownership factsheet that should help clarify these issues. While you're at it, check out our low-power FM factsheet for info on other community radio possibilities.

It’s definitely encouraging to know that many of our representatives are concerned about diversity, competition and localism in radio. And it’s doubly great that Mac McCaughan would take the time to offer his perspectives on these issues in the very place where they most need to be discussed.

Watch McCaughan's testimony (and the rest of the hearing) here.

Walmart goes Indie?!?

Walmart is probably the last place you'd think to look for an indie music release. The store's music section is a bastion of the most mainstream, top 40-friendly music you can find. It's Xtina, Fergie and Akon as far as the eye can see.

But according to a posting over at EW.com that could soon change (thanks to Hypebot for tipping us off to the story). It seems you may soon be able to buy The Shins, Ted Leo, Clap Your Hands and Say Yeah, Bloc Party and a bunch of other indies along with your water wings and jumbo Cheetos.

Some of the major indies are planning a series of compilations based on the idea of the popular "Now That's What I Call Music" pop compilations. Vice Records is looking to release the first -- as yet untitled -- compilation this summer. No word on a track list yet. Now that's what we call music.

Here's an interesting excerpt from the EW piece that explains the audience the labels are trying to reach:

'These bands' records sell really well to a particular audience,'' says Adam Shore, general manager for Vice Records, which aims to release the first volume this July (they're already the American home to high-profile acts Bloc Party, the Streets, and Charlotte Gainsbourg). ''But even though these artists are getting all this media exposure, they're not necessarily crossing over to a very casual record buyer.'' The plan of action? ''We're partnering with MTV2, and the focus is going to be Walmarts, big box stores, red states, and TV advertising — to really go beyond. . . We don't really expect indie-rock stores to support this record. It's for the casual fan.''

More than anything else, this news seems to be another indicator of the long erosion between the underground/independent music scenes and the mainstream. It's hard to imagine indies placing their products in Walmart a decade ago, but in an age when Arcade Fire opens at #2 on the Billboard charts it may just make sense. It also indicates the huge boost indie music has gotten from the Internet. With a platform that allows indies to compete on the same footing as majors, it shows many people are exercising their right to choose.

Of course, the news also brings up whether indie fans want their money to go to a chain that has questionable labor practices, but that's a discussion for another post.