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!

Webcasting Royalty rates: Deal or No Deal?

Back in September 2008, we told you about the passing of the Webcaster Settlement Act, which allowed for the implementation of an agreement between copyright owners, performers and online broadcasters on webcasting royalty rates — provided they arrive at mutually-agreed-upon rates by February 15, 2009.

To better understand the situation, a little history is in order. In May of 2007, the Copyright Royalty Board set royalty rates for online broadcasts that many webcasters said would mean lights out for their services. In the wake of this decision, webcasters and SoundExchange (the designated organization that collects and distributes payments to performers and labels for digital broadcasts) have been negotiating rate compromises, to varying levels of success.

SoundExchange seeks equitable payments for its members, which include performing artists and labels, while the webcasters want to broadcast without going bust. So it’s a bit more complicated than “these guys are awesome, and these guys are jerks” (although some may be inclined to see it that way.)

In FMC’s statement on the original CRB rate setting, we called on parties “to adopt reasonable rates and reporting requirements for clearly-defined categories of small, noncommercial and hobbyist webcasters that will ensure the future development of this medium.” We also stressed the importance of properly compensating artists, performers and labels for uses of their work, without which there’d be nothing much to play. We remain hopeful that any final agreement will satisfy these concerns and ultimately lead to the discovery of more music. The latter is something webcasting can play a huge role in, provided there’s a way forward.

Some individual deals have already been made. The National Association of Broadcasters and SoundExchange reached an accord on February 16 that sets a per-song rate for simulcast programming online or stand-alone internet stations through 2010. (The next rate-setting period would cover 2011-2016.) The Corporation for Public Broadcasting came to a February 15 agreement with SoundExchange that sets a one-time payment of $1.85 million together with consolidated usage and playlist reporting from CPB on behalf of the entire public radio system. This settlement covers streaming services from January 1, 2005 through December 31, 2010. Earlier this year, some smaller webcasters accepted a deal with SoundExchange that bases royalty rates on revenues and site traffic; others are still negotiating.

So what happens next? Well, the Digital Media Association (which represents large webcasters like Pandora and RealNetworks as well as tech companies like Apple and Nokia) is free to continue negotiations with SoundExchange. But unlike under the Webcaster Settlement Act, any agreement would only apply to copyright holders that are signed up with SoundExchange — it wouldn’t cover everyone. Meanwhile, the original CRB decision is on appeal. Congress could extend the deadline for a negotiated solution that will apply to all parties, but new legislation would have to be introduced and passed in both houses. So for the moment at least, the future of webcasting is anything but certain. We'll keep you posted.

Future of Music is On Demand

FMC Education Director Kristin Thomson recently put together a short presentation about how being a music junkie in the digital age doesn't necessarily mean owning stacks and stacks of CDs or having gazillions of MP3s cluttering up your hard drive. Not that there's anything wrong with that — but the point is that these days, you've got options.

Kristin's been obsessed with music since, well, forever, and she's got a massive LP collection to show for it. Which is totally cool, but not always convenient. In the clip below, Kristin explains how the future of music might be more about "access" than collecting physical product (or even audio files):



Look for more micro-presentations on all kinds of interesting subjects in the near future!

Audio Ads on Pandora

You might have run across the handful of articles in the last day or so about online "predictive" radio service Pandora adding audio ads. This move is no doubt an attempt to develop a sustainable revenue stream for Pandora's free services (the company also offers yearly ad-free subscriptions for $36).

We at FMC are big Pandora fans, and we know we're not alone. It's a good bet that the service's regular users will continue to support it, largely due to Pandora's easy-to-use and highly addictive architecture that allows listeners to customize any number of "radio stations" based on their musical preferences. But we'll have to wait and see.

Pandora founder founder Tim Westergren said that ads would only appear once every two hours, which is nowhere near the level of interruption heard on commercial terrestrial radio. Westergren has been front-and-center in the ongoing webcasting royalty rate negotiations, claiming that the rates set forth by the Copyright Royalty Board in March 2007 would drive Pandora and other online broadcasters out of business.

In our original response to the CRB decision, FMC “urge[d] the parties to work together to strike a balance that recognizes the value of webcasting, but also properly compensates artists, performers and labels for uses of their work." We also voiced our support for a Public Performance Right for terrestrial radio, which online broadcasters pay but over-the-air stations do not. (Check out FMC Executive Director Ann Chaitovitz's January 7, 2009 Huffington Post Op-Ed and our Performance Right Fact Sheet to learn more.)

Negotiations between labels, artists, big and small webcasters and SoundExchange (the organization tasked with collecting and distributing royalties from online broadcasting) continue. This FMC post from September 2007 helps explain what will happen should all parties come to an agreement.

In related news, we're thrilled to have Tim Westergren confirmed as a panelist at our upcoming DC Policy Day on February 11, 2009 at the National Geographic Society here in Washington. You'll wanna think up some good questions and reserve your spot now! A limited number of musician scholarships are still available; head here to apply.

Local is the New Global

Today's blog post was co-authored by FMC intern Daniel Eno, based on a bit of pondering by FMC Events Organizer Chhaya Kapadia.

Do you ever get nostalgic about cruising the racks at your local record store? Do you ever feel that, while it may be infinitely more convenient and even a couple dollars cheaper to buy an album off of iTunes, it’s nice to know your purchase helped keep your neighborhood shop up and running? What if you could combine the convenience of online purchasing with that warm feeling you get from supporting your local music-slingers?

One of our favorite broadcasters, Seattle’s KEXP, wants to help you do just that. The station has integrated a new feature into their online streaming radio that provides a means to buy local without having to leave the comfort of your computer keyboard.

Like other internet stations, KEXP's live stream features links to places to buy almost any tune that catches your ear. But in addition to the standard Amazon and iTunes links, KEXP also points to local record shops that will deliver the album right to your doorstep. Webcasters like KEXP have helped make broadcasting global, so it’s cool that they’re giving local listeners a way to buy music in their own backyard.

It's not clear how much new business this feature has generated for local shops, and maybe it amounts to nothing more than a kind gesture on the part of KEXP. Still, it's not hard to imagine that this sort of service might be implemented on the sites of other stations around the country. Stores like New York City's Other Music offer high-quality digitized versions of their awesome underground music collection, but as far as we know, there’s no online radio component — at least not yet. It would be interesting if the mass consumer movement toward online shopping turns out to be what saves local record shops. It’s a nice thought, anyway.

FMC believes that the future of music is inextricably tied to sustainable cultural communities. This is why we support localism on the public airwaves by fighting the forces of consolidation and encouraging community radio initiatives like Low Power FM. The internet has its part to play, too – better broadband penetration and open structures that let artists (and smaller retailers) compete on a level playing field with the big companies is essential to a legitimate digital music marketplace, local and otherwise. It’s like one hand washing the other, or whatever other metaphor you want to use.

KEXP’s local purchase feature also fits nicely with Seattle’s “City of Music Initiative,” a mayoral effort to promote the city as “home to musicians, live music and music business.” We hope more burgs follow Seattle’s lead in the name of regional diversity and sustainable cultural commerce.

(Web)Casting Call, Round II

Yesterday, we mentioned the House of Representatives' passing of the Webcaster Settlement Act of 2008. The bill allows copyright owners, performers and online broadcasters to negotiate royalty rates for webcasts in Congress' absence, and permits the implementation of an agreement — provided they can reach one. (Check out our previous post for the full rundown).

On Tuesday, September 30, 2008, the Senate passed its version of the bill, which now awaits signing by the President. The legislation allows all parties to negotiate through 2015, and sets set a royalty rate retroactive to 2006, pending settlement.

Such an agreement would set aside the Copyright Royalty Board's (the judicial body that decides royalty rates) 2007 decision, which many webcasters argued would drive them out of business.

As we've said in the past, we hope those involved in negotiations can come to an agreement that allows for the growth and stability of webcasting, but also provides fair compensation for creators.

(Web)Casting Call

FMC has been following the back-and-forth about webcasting royalty rates almost as long as webcasting has existed. We’ve always recognized the value of smaller online broadcasters to the online music world — their passion and energy mean an awful lot of music that would otherwise have no outlet can reach ears around the world. We also support the continued development of larger webcast services, particularly the ones with innovative technology that conforms to your personal taste, like Pandora. On the other hand, we believe that artists should be fairly compensated for their work, and that the success of new technologies can’t come at the expense of creators’ interests.

Unfortunately, there have been a few roadblocks on the webcasting highway. Back in March 2007, after a lengthy proceeding, the Copyright Royalty Board (CRB) — a government body responsible for setting royalty rates — set a rate scheme for webcasts that many online broadcasters claimed would force them out of business. In our response to the 2007 CRB decision, we “urge[d] the parties to work together to strike a balance that recognizes the value of webcasting, but also properly compensates artists, performers and labels for uses of their work."

Those parties — which include labels, artists and big and small webcasters — have been involved in negotiations to find a royalty rate that would do just that. But with the 110th Congress about to wrap up, even if an agreement was reached, it couldn’t be implemented until the next session convenes.

The Webcaster Settlement Act of 2008 (H.R. 7084) — which was passed by the House of Representatives on September 27 — permits the implementation of a settlement agreement, should one arrive. Its passage will hopefully allow room for productive solutions that would be of benefit to artists, copyright holders, web broadcasters and, ultimately, listeners.

On a related note, FMC reiterates its call for a public performance right for terrestrial radio. We have a fact sheet that explains the issue in depth, but here's the quick 'n' dirty version: when Sinead O’Connor’s version of “Nothing Compares 2 U” is broadcast on the web, both the songwriter (Prince), and the publisher are paid. So are the performer and the label. But, when traditional radio broadcasts the same recording, only the Prince and his publisher receive a royalty.

While no one would deny the Purple One’s his due, Sinead’s voice certainly had a lot to do with the success of that recording. Why shouldn’t terrestrial radio compensate the performer who helped make the song a hit? There’s also the question of consistency. The lack of a performance right for broadcast radio creates inequalities between traditional broadcasters and webcasting. Why should terrestrial radio have the competitive advantage when both stations are competing for the same listeners?

FMC is pleased that the House realized the importance of these negotiations and the need to implement any agreement reached. We hope that the Senate will do the same. And, now that Congress is paving the way for implementation, we hope that the parties will be encouraged to reach an actual settlement. Stay tuned!

The Future of (Digital) Music? - By Mehan Jayasuriya

There's no doubt that the emergence of peer-to-peer file sharing, music blogs and portable media players just a few short years ago launched a digital music revolution. Yet as incredible as carrying around tens of thousands of songs in your pocket is, selling songs via the PC is not likely to be a permanent music business model. What’s next for the iPod and its brethren? A quick look at the devices currently on the market points to a wireless future. Apple's high-end iPod Touch and it's closest competitors, the SanDisk Sansa and Microsoft Zune, all have the ability to acquire music wirelessly -- via either an online store or wireless file sharing. Although these features are exciting for many consumers, they basically constitute a wireless version of the same old same old, and represent only an intermediate step in the evolution of digital music. So what’s really next?

One strong possibility is, surprisingly enough, a relatively old technology: Internet radio. But this isn't your Grandpa's Internet radio. (OK, maybe your older sibling?) A new breed of mobile music service is emerging that blends social networking, smart recommendations and customized radio into an integrated music platform. Having found success online, social music platforms such as Last.FM and Pandora are now taking baby steps into the mobile space. Pandora, for example, has partnered with both AT&T and Sprint to bring their service to mobile phones in the U.S., while competing service Slacker has introduced their own $199 device that allows users to carry personalized radio stations with them on the go.

What makes this new breed of service so compelling is that it caters to the user’s personal tastes. By monitoring the music that you listen to and prompting you to rate the songs you hear, Pandora and its ilk build up a database of your tastes over time. That data is then used to generate playlists consisting of songs that fit your personal profile. The result is basically an Internet radio station that only plays songs that you like, and, the more that you use the service, the more accurate it becomes.

Internet radio is different from terrestrial radio, in that webcasters pay ASCAP/BMI/SESAC for songwriting royalties but they also pay royalties to performers and record labels. This is because of the Digital Performance in Sound Recordings Act of 1995, which established a digital performance royalty for sound recordings. SoundExchange is the designated organization that collects dues and distributes payments to recording artists and labels for performances on webcasts, satellite radio, cable TV, and even for play on services like Pandora.

If webcasting does take off, this could mean a wider distribution of money per play, provided artists and labels are on board.

The best way for indie artists and labels to get paid for online play is to sign up with SoundExchange. Their website even has a searchable database called “Plays” that allows artists and labels to see if they’re owed anything. Well, money at least. To learn more about compensation in a digital world, check out our SoundExchange primer.

Mehan Jayasuriya is a technology and music journalist who lives in the Washington D.C. area. Outside of his contributions to the Future of Music Coalition, he also writes for DailyTechRag and local culture blog DCist. You can visit his personal website at www.mehanjayasuriya.com.

Senate Commerce Hearing Tackles Performance Royalties

Yesterday, the Senate Commerce Committee held a hearing on the Future of Radio. This hearing was set up to address a range of issues -- LPFM, ownership, royalties, public radio, etc -- but after a New York Times article last week disclosed that FCC's Chairman Kevin Martin was considering a fast track effort to loosening media ownership rules even further, the Senators also used this time to send a message to the FCC, reminding the commission that a bi-partisan majority had objected to the efforts to deregulate media in 2003, and the Senate was ready to do so again.

During the hearing, Senators Snowe, Inouye and McCaskill all had cautionary messages for the FCC. Senator Dorgan was the most focused, warning the FCC that it was in for a "huge battle" if they thought they were going to relax the media ownership rules by mid-December. Immediately after the hearing, Dorgan met up with his Republican colleague Trent Lott for a bi-partisan press conference to introduce a bill that would prevent the FCC from rushing to judgment in the ongoing media ownership proceeding.

The Senators also spent a lot of time asking witnesses about on the ongoing debate about performance royalties, for both internet radio play and terrestrial radio play.

A bit of background: When you hear a song on regular radio in the US, the composer/songwriter are compensated for that "public performance" via ASCAP/BMI/SESAC, but the performer and record label are not.

However, if you hear the same song performed via a digital platform of some sort -- this includes XM or Sirius, or via a webcast, or on a cable music station, even on that very same terrestrial radio station's webcast -- the songwriter gets her/his ACSAP/BMI/SESAC royalties AND the performer and record label are compensated via SoundExchange. Huh? Different royalties for the very same performance?

This difference exists because US terrestrial broadcasters have been exempt from paying a public performance right for sound recordings for decades, despite the fact that this right exists in almost every other Western country. The exemption has withstood repeated criticism -- this was a right that Frank Sinatra lobbied for back in the 1960s, and the US Copyright Office has supported the establishment of a public performance right for just as long -- but the National Association of Broadcasters is a very powerful trade group that has been able to beat it back every time.

However, this right *does* exist for digital performances (i.e. webcasts, satellite radio, etc) because of the passage of the Digital Performance Right in Sound Recordings Act by Congress in 1995. This means that, when you hear John Coltrane playing "My Favorite Things" on an XM station, composers Rodgers and Hammerstein are compensated via ASCAP, and John Coltrane's estate and his record label are compensated via SoundExchange.

[If this still isn't clear, you can learn more by reading our fact sheet about the performance right, a SoundExchange Primer, or a letter that we sent to Congress in 2005 supporting public performance right for sound recordings]

So, back to the hearing.

During his testimony, broadcaster Russell Withers, who was also testifying on behalf of the NAB, mentioned their opposition to the "performance tax". That's the NAB's new way of trying to sully this debate because, you know, nobody likes taxes.

During the questioning, Senator Sununu tried to dig in a bit on this topic by asking about the NAB's position on the current webcasting royalty debate, asking Withers whether the NAB opposes the rates that the Copyright Royalty Board (CRB) set for webcasting, or whether they oppose the royalty altogether. After some deflection, Withers said that he "objects to paying them", though Sununu's line of questioning left us wanting more clarity.

Then Sununu asked Tim Westergren from Pandora who Pandora competes against. According to his testimony, Pandora is the third largest webcaster in the US and paid out over $2 million in performance royalties in 2006, something they are very proud of. Answering Sununu's question, Westergren said that he thinks they compete against anything that resembles radio, including stations like Mr. Withers'. Pandora, he said, and other webcasters operate under a radically different rate structure than established terrestrial broadcasters, and that they are simply looking for "rate parity".

Senator McCaskill had the final question of the hearing, which was directed at Mr. Withers. Taking up where Sununu left off, she asked the broadcaster how the NAB can justify the differences in costs for licensing music between different platforms. She asked him (to paraphrase): how can it work when Pandora has to pay for something that you get for free?

This led to the tensest moment of the hearing. Unfortunately, the question was left unanswered by the witnesses because the senators had to leave for a floor vote. McCaskill did, however, request a written answer.

For seven years, FMC has consistently reiterated our view that Congress should establish a public performance right for terrestrial broadcasts that does not curtail the traditional royalties received by songwriters/ publishers or unduly burden non-commercial broadcasters.

FMC has also weighed in on the webcast rate debate through testimony and news releases, saying that the best solution is a proportionate royalty structure: large commercial webcasters should pay rates that use their audience size and associated revenue as a means to measure their royalty rates, and there should be reasonable rates and reporting requirements for clearly-defined categories of small, noncommercial, college and hobbyist webcasters that will ensure the future development of this medium.

Artists need small webcasters. Small webcasters need music. And artists deserve royalties. Congress needs to create a royalty rate structure that doesn’t damage both in the process.

Whether this hearing gets us closer to resolution remains to be seen, but performance royalties and webcasting rates are certainly on the congressional radar.

SoundExchange reaches agreement with some large webcasters

The Cold War between SoundExchange and webcasters over the new royalty rates is thawing -- at least in part. SoundExchange announced yesterday it had reached a compromise with some large webcasters that will give them a break on the rates set by the Copyright Royalty Board back in March.

The CRB had required webcasters to pay a minimum $500 "per station per channel" fee with no cap. This would add up to a hefty chunk of change for webcasters (such as Pandora) that allow each listener to create a persona web channel. Under the terms of the compromise, each webcasters' royalty rates will be capped at $50,000 regardless of the number of stations or channels.

The compromise also calls on webcasters to report each song they play to SoundExchange, instead of a sampling as is required right now. There is also a requirement that the sides continue to discuss anti-stream ripping technology.

John Simson, executive director of SoundExchange, made the following comment about the deal:

“This agreement shows that we can address specific issues of concern to the industry through private negotiations while upholding the integrity of the CRB process and while protecting the interests of SoundExchange members."

Right now, the agreement only applies to webcasters, who have signed the compromise, but SoundExchange hopes it serves as the basis for a larger compromise with the whole industry. Billboard reports the signers are AOL, Live365, MTV, RealNetworks, Pandora and Yahoo.

Separately, SoundExchange has offered to keep small webcasters under their current royalty rates through 2010. RAIN obtained a copy of the agreement which would:

• 
  

Allow webcasters to continue operating under the terms and rates essentially equivalent to those authorized under the Small Webcasters Settlement Act of 2002.

• Establish an annual revenue cap of $1.25 million and a listener cap of each webcaster's first 5,000,000 aggregate tuning hours ("ATH") of usage each month. The offer also states that for any usage in a single month above 5,000,000 ATH, the webcaster must pay the applicable commercial webcaster rates (currently $0.0011 per performance during 2007.)

• Be valid until a webcasters' overall annual revenue exceeds $1.25 million, the terms of the offer are void. After a six-month "grace period", the webcaster is no longer eligible for the terms of the settlement and would begin paying the rates mandated by the CRB decision of March 2.

The SoundExchange offer also maintains that the settlement is "non-precedential", adhering to the organization's contention that these rates reflect a below market rate subsidy extended to small commercial webcasters.

Small webcasters have until Sept. 14 to accept the deal. Small webcasters seem less than enthused by the offer (to put it mildly). David Oxenford, the attorney representing small webcasters in the negotiations with SoundExchange, sees nothing new.

The proposal of SoundExchange simply turns their offer made in May, summarized here, into a formal proposal. It does not address the criticisms leveled against the offer when first made in May, that the monetary limits on a small webcaster do not permit small webcasters to grow their businesses – artificially condemning them to be forever small, at best minimally profitable operations, in essence little more than hobbies.

You can read his full comments here.

This Week in News: Monday, August 13, 2007

DRM

Study: Consumers Prefer DRM-Free Tracks
A survey conducted by law firm Olswang Entertainment and Media Research of over 300,000 UK music fans reveals that DRM-free music is preferred by consumers, as well as a willingness to pay more for DRM-free tracks.
By Anthony Bruno, Billboard.biz, August 6, 2007

UMG Ramps Up DRM-Free Testing
Universal Music Group, following the lead of EMI, will begin selling thousands of DRM-free tracks on various digital music outlets in a test to see how DRM-free tracks affect sales. Itunes is excluded from UMG test in an effort by UMG to protest Apple’s dominance of the digital marketplace.
By Anthony Bruno, Billboard.biz, August 9, 2007

Webcasting

Webcasting Royalties: Indies vs. Majors
Live365 has found that 55% of the music played on its various channels is from independent labels. These numbers contrast the CD sales, 87% of which are from major labesl. This research indicates the importance of internet radio to independent artists and highlights how independent music could be damaged by the potential collapse of internet radio brought on by the increase in webcasting royalties.
By John Healy, LA Times, July 26, 2007

Music Industry

Starbucks Records: Number One With A Latte
USC Music Industry Professor praises Starbucks for finding a new and successful business model for selling CDs and points to live music as the new music business where the growth potential exists.
By Jerry Del Colliano, Inside Music Media, August 9, 2007

Going postal
New postage rates have increased the price of mailing CDs by 34%. Although reviewers and radio stations may prefer receiving promotional CDs rather than promotional mp3 files, the Digital Audio Insider wonders whether the cost of sending CDs is proportional to the benefits reaped.
Digital Audio Insider, August 6, 2007

Large Webcasters And SoundExchange to Continue Negotiating Soon
Negotiations between large webcasters and SoundExchange over the CRB ruling are tentatively scheduled to resume in two weeks.
By Eliot Van Buskirk, Wired blog, August 8, 2007

Other

Who has to pay if music plays?
Following ASCAP’s lawsuit against a Seattle restaurant owner for failing to pay royalties to play music inside its venue, the Seattle Times asks intellectual property lawyer Matt Geyman to explain the workings of public performance right.
By Kristi Heim, Seattle Times, August 8, 2007

RIAA Lobbying Expenses Cross $650,000 During First Half
According to documents uncovered by the Associated Press, the RIAA has already spent $650,000 during the first half of 2007 on lobbying expenses alone. These documents provide insight on the RIAA’s budget, which focuses on file-sharing lawsuits and piracy among other issues.
By Paul Reskinoff, DigitalMusicNews, August 7, 2007

Friday, July 20, 2007: This Week in News

Radio

The Great Spectrum Giveaway
The FCC is giving radio spectrum to community-based non-profit organizations in October. Radio for People, which includes Prometheus Radio, FMC, and Free Press, is assisting groups with the complicated application process, but many obstacles still exist to prevent community groups from breaking into a highly consolidated radio spectrum.
by Megan Tady, In These Times, July 18, 2007

RIAA to feds: Make XM-Sirius pay more, restrict listeners' recording
The RIAA has submitted comments to the FCC that urge the agency to approve the XM-Sirius merger only if the company agrees to create protections against the copyright infringing practice of "song trapping."
by Anne Broache, CNET, July 9, 2007

Webcasting

The Internet Radio Royalty Debate: Frequently Asked Questions
Digital Music News answers some of the most confusing questions about the ongoing internet radio royalty debate.
Digital Music News, July 15, 2007

FAQ: Net Radio's Mixed Signals
Amidst lots of talk in the blogosphere concerning July 15's increase in webcasting royalty rates, Anne Broache tries to answer some of the most common questions concerning the royalty hike.
by Anne Broache, CNET, July 13, 2007

Net radio negotiations hit snag over DRM
New debate emerged over whether webcasters should be required to cloak their streams in technologies designed to prevent "streamripping" as part of an agreement to cap the administrative fees they owe to SoundExchange.
by Anne Broache, CNET, July 18, 2007

DiMA and SoundExchange Trade Blows
Digital Media Association, a lobby group representing the internet's largest webcasters, and SoundExchange are engaged in arguments over webcaster royalty rate negotiations. DiMA claims SoundExchange has "backtracked" on its promises while SoundExchange maintains that DiMA has misunderstood their proposals.
by Eliot Van Buskirk, Wired.com, July 18, 2007

Public Radio: No Webcast Changes For Us Now
Public radio has reached a temporary agreement with SoundExchange that allows them to continue streaming music for the next three months. In the meantime, the Corporation for Public Broadcasting has offered SoundExchange a payment for what they believe they will owe on July 15, and talks will continue between the two parties to negotiate a final agreement over fees.
by Anne Broache, CNET, July 14, 2007

Music Industry

The Digital Pre-Release Soft Launch and The More Of Less Strategy
The Canadian band Stars has decided to do a digital-only release of their new album 2 months before the street date. Glenn from Coolfer reports on the impact of this announcement.
Coolfer, July 18, 2007

New Format, Same Hope
The music industry has been criticized for holding onto a dead format, the CD. But CDs still make up 80% of album sales and are still preferred by many to digital downloads. Disney announced that they will now use the CDVU+ format, which is like a normal cd with video and photo extras.
Coolfer, July 19, 2007

Pirated Music Helps Radio Develop Playlists
Although the music industry is cracking down on piracy, it is also showing interest in what music illegal downloaders want. Clear Channel began collecting information on the most popular downloads from illegal file-sharing networks to help shape the playlists for their terrestrial radio stations.
by Sarah McBride, Wall Street Journal, July 12, 2007

Accused of Payola (Again), Clear Channel Scuttles Waiver Clause
Following FMC's attacks on Clear Channel's payola scheme, Clear Channel has "quietly dropped a licensing agreement that requires independent artists to waive royalties to be considered for airplay on the chain's more than 1,100 stations."
by Robert Wilonsky, Dallas Observer, July 19, 2007

Zune Pay-To-Share Rumors Floated Again
ZuneScene, a fansite dedicated to Microsoft's Zune, is reporting that Microsoft is patenting a Pay-To-Share system. With Pay-To-Share, users would share songs with expiration dates. If users then buy the song for themselves, the sharer would receive a commission in the form of music points or other currency.
by Matt Rosoff, CNET, July 13, 2007

Net Neutrality

The Players Vying for Spectrum
The Washington Post breaks down potential bidders in the upcoming 700Mhz
Auction for spectrum.
Washington Post, July 13, 2007

Friday, July 6, 2007: This Week in News

Webcasting

SoundExchange Minimum Fee Offer Draws More Pushback
SoundExchange offers to cap minimum per-station fees at $2500 ($500 per station). While this would ease the pressure on services like Pandora or Live365 that create hundreds, if not more, personalized stations for listeners, the devil, as always, is in the details. Namely, SoundExchange will only agree to the cap if stations agree to stop their lobbying efforts for the Internet Radio Royalty Act, which would reverse the CRB's ruling for higher royalty fees.
by Paul Resnikoff, DigitalMusicNews, July 5, 2007


Webcasters' Plea Falls on Deaf Ears
Lawmakers met to hear testimony from groups and individuals affected by the impending July 15th increase in internet royalty rates, but concluded that private negotiations would be more effective than government intervention at this point. Everyone agreed, however, that the ongoing question of how artists can be fairly compensated for their work was ultimately not in the hands of SoundExchange and the music industry.
by Olga Kharif, Businessweek, June 29, 2007


Internet radio compromise on the way?
SoundExchange announced that it has offered the Digital Media Assocation (DiMA) a $2500 cap on the new webcasting royalty requirement. However, SoundExchange's only applies until 2008 while the increased rates extend through to 2010.
By Anne Broache, CNET, July 2, 2007

Radio

Terry Meets Band Known for Treadmills Video
The band OK Go recently met with Representative Lee Terry (R-NE) to discuss low-power FM radio. They also thanked Lee, who introduced the Local Community Radio Act on June 21st, for his efforts to keep low-power FM alive.
by Jenny Nowatzke, KETV, June 29, 2007

Traditional Radio to Pay for Play?
The music industry is lobbying Congress to get terrestrial radio to pay the
public performance royalty for sound recording, just like its Web and
satellite siblings
by Olga Kharif, Businessweek, July 5, 2007

New Technology

Widget helps fans, artists sell digital music
A new digital music technology called Mixtape, offered by the company
Goodstorm. can be embedded on blogs and Web sites, making them digital music stories.
Benny Evangelista, San Francisco Gate, July 2, 2007

Public Enemy to Use a Digital Distributor
Hip-hop legends Public Enemy are using TuneCore to digitally distribute
their next album. Says founder Chuck D: "I knew I had a fan base and I
wanted to go directly to them," he said. "What good is a label? All they do
is give you money. And in the area of digital distribution, they can't do
anything better or faster than anyone else."
Robert Levine, New York Times, July 2, 2007

Music Industry

EMI First Major to Sell MP3s Via Individual Sites
A deal between EMI and Snocap now allows music fans to purchase and download DRM-free mp3s directly from individual websites. Currently, the deal only allows for songs to be sold on MySpace pages but is set to expand to more sites in the future. 30 Seconds to Mars, Korn, Dean Martin, MIMs, and Yellowcard are among some artists who will begin selling mp3s on their MySpace pages.
by Antony Bruno, Billboard Biz, June 29, 2007

A change of tune
Some major labels are changing their deals with artists to include not just
music sales but other revenue streams including merchandising, concert
revenue and licensing deals
The Economist (UK), July 5, 2007

Net Neutrality

AT&T Rigs Net Neutrality Study
New studies by Renssalaer Polytechnic Institute and the University of Nevada Reno have reported that "a net-neutral approach requires between 60 and 100 per cent more capacity to maintain the same level of performance." However, the credibility of both studies is questionable, because both were funded by AT&T who has long supported a "tiered Internet."
by Cade Metz, The Register, July 4, 2007

How the FTC Mangled Net Neutrality
Last week's FTC report on Net Neutrality lacked original research on the broadband market and simply reiterated justifications of how discriminatory behavior could benefit broadband providers. Their "wait-and-see" conclusion is ultimately flawed, because the analysis that led them to it contains illogical and, in some cases, irrelevant arguments.
by Art Brodsky, TPM Cafe, June 28, 2007

FMC's press release on FTC report:
http://www.futureofmusic.org/news/PRFTCnetneutralityreport07.cfm

Other

McCain Panders to Right Wing, Drops Call for Media Diversity
In response to the blocked Democrat-backed reinstitution of the Fairness Doctrine, John McCain has introduced the Broadcaster Freedom Act which states that "divergent viewpoints do not have to be offered on the same radio or television show, but can be found simply by channel surfing, reading a newspaper or browsing an Internet blog.
Think Progress, July 5, 2007

Republican Sideshow? The Fairness Doctrine and the Politics of Panic
Matthew Lasar discusses why the Fairness Doctrine has once again become an issue in politics and the events leading up to the proposed Broadcaster Freedom Act, which would kill the Fairness Doctrine once again.
by Matthew Lasar, Lasar's Letter, July 4, 2007

Classical music in a digital age

Chicago Classical Music is running a two part piece over the next two weeks called "Think Digitally, Broadcast Globally" by the Future of Music Coalition. The piece focuses on how the Internet has changed the way classical, jazz and world music reaches fans. Here's an excerpt from the first installment:

Just a decade ago, options for hearing chamber music, jazz, and world music on the radio were straightforward and rather limited: a local NPR or Pacifica station spinning Beethoven string quartets or Wynton Marsalis on a dial filled with infinite varieties of commercial pop, country, and talk.

But as with many art forms, the Internet has revolutionized how niche music reaches fans. With recording, podcasting and webcasting becoming cheaper every day, traditional radio broadcasts have morphed into dozens of new forms on the web, and - perhaps most importantly - the line between being a performer and a broadcaster has blurred. This new environment offers new possibilities for reaching new audiences, but it requires a new way of thinking about radio.

More than a quarter of all Americans tuned into web radio last month. Of that, 25% were tuning into simulcasts of their favorite broadcast stations. But what were the rest listening to? At least 6,000 of them were listening to Wolf Trap Radio, checking out live recordings of classical, cabaret and soft rock from the Filene Center, interviews with performing artists and Wolf Trap staff, and special programming such as music and commentary from jazz pianist John Eaton. Wolf Trap Radio broadcasts 24 hours a day and is accessible via their website, Live365.com, and - perhaps most importantly - the iTunes web radio station directory, filed under "Eclectic".

Radio offers many opportunities for classical music, but the key to finding them is understanding the medium in the Internet age. It requires new partnerships, new thinking, and, in some cases, becoming a DJ.

To read the whole thing, go here.

This Week in News: Friday, June 29, 2007

Webcasting


Congress urges peace talks in Net radio conflict
In a hearing on webcasting on Thursday, members of Congress admitted that they were unsure how to balance the interests of webcasters with the need to compensate artists through royalties. Since the new royalties are effective on July 15, Congress is urging webcasters and SoundExchange to work things out independently in order to beat the deadline and avoid the collapse of small business webcasters.
by Anne Broache, CNET, June 28, 2007


Small Business Committee Hears Testimony For, Against, CRB Rates
Thorough coverage of the House committee hearing on the webcasting rates, as well as links to testimony filed by FMC and the Small Webcaster Group
by Kurt Hanson, June 28, 2007;See video from the hearing here.

eMusic Lends Support to Web Radio Campaign
Following June 26th's "Day of Silence," retailer eMusic has announced that it will donate a "modest contribution" to SaveNetRadio.org in protest of increased royalty rates for webcasters set to go into effect on July 15.
by Todd Martens, Billboard Biz, June 27, 2007

Web Radio Stations Hope Silence Speaks Volumes About Fee Hike
Pandora, Live365 and Real Networks' Rhapsody, as well as terrestrial radio stations such as Washington's WAMU and Santa Monica, California's KCRW participated in internet radio's "Day of Silence," which protests the hike in royalties set to take effect on July 15.
by Mike Musgrove, Washington Post, June 26, 2007

Internet Radio Holds Out Silent Hope
Mike McGuire, an analyst at Gartner, said he is sure the Internet radio Day of Silence raised awareness among consumers, many of whom might not have heard about the royalty issue, but he also pointed out that it is questionable whether the Day of Silence protest will rally enough support to reverse the royalty hike.
by Jennifer LeClaire, Newsfactor, June 27, 2007

Music Industry

Music Biz Agrees: Stop Shooting Self in Foot
Industry executives gather at a retreat in Norway to face the harsh realities of a music industry that is undergoing seismic changes.
by Andrew Orlowski, The Register, June 27, 2007

Hanging Up On Ringtones
Rumors are flying around the blogs about whether the new iPhone will allow consumers to convert previously purchase songs into ringtones, and what the price would be, if any. But there are larger questions about the ringtone market, where sales have leveled off. Are consumers now more interested in "sideloading" their own content onto their phone?
Guardian Unlimited (UK), June 28, 2007

To Free or Not to Free
The Layaways blogger/musician debates whether his band should give away their next album via free MP3s. The list of pros and cons is definitely worth reading.
Digital Audio Insider, June 27, 2007

Net Neutrality

Gov. Regulators Issue Wait-And-See Net Neutrality Report
The Federal Trade Commission' took a neutral stance in a report on Net Neutrality released by their Internet Access Task Force. Despite warnings by Net Neutrality proponents, the FTC is unsure that the prioritizing on Internet content through charging fees for fast lanes will be harmful.
"It's clear from the 170 page report that the FTC has no immediate plans to step in on its own."
by Ryan Singel, Wired, June 28, 2007

FTC on Net neutrality: No new laws needed
The FTC report on Net Neutrality indicates the FTC believes Net Neutrality regulations are not needed. Public interest groups, such as Public Knowledge, have responded with disapproval and criticism.
by Declan McCullagh, CNET, June 28, 2007

Net neutrality on Congress's fall agenda?
Never mind that federal regulators discouraged so-called Net neutrality regulations in a report unveiled Wednesday. Democrats in Congress say they still believe it's necessary to enact a new law to clamp down on the perceived threat posed by broadband operators that want to charge content
owners extra fees for priority placement.
by Anne Broache, CNET, June 28, 2007

Radio

Congressional Pair Introduce Low Power FM Legislation
Congressmen Mike Doyle (D-PA) and Lee Terry (R-NE) have introduced legislation that will repeal the Radio Broadcast Preservation Act and allow thousands of low power FM stations to begin broadcasting. The Act currently prohibits low-power FM by requiring that radio stations in a given market be four intervals apart. More low power stations will increase localism and diversity in terrestrial radio. In response to the bi-partisan legislation, the National Association of Broadcasters has announced its opposition to an "overcrowded radio dial."
Radio Ink, June 22, 2007

An XM-Sirius Union: Yea or Nay?
The FCC has asked for public comment on the proposed XM-Sirius merger, which would violate an order specifically prohibiting a satellite radio monopoly, to determine whether the union is in the public interest.
by Anne Broache, CNET News, June 27, 2007

Karmazin Finds the Right Wavelength
Sirius CEO Mel Karmazin, likely to lead XM-Sirius if the merger is approved, has more to worry about than pressuring the FCC for approval. While it is agreed that Karmazin is a talented Chief Executive, neither Sirius nor XM have turned a profit since their entry into satellite radio.
by Matthew Kirdahy, Forbes, June 25, 2007

Bill Would Undercut Democrats' Push to Regulate Talk Radio
Republican Congress Mike Pence (R-IN) has warned that Democrat-backed reinstitution of the Fairness Doctrine would be a dangerous rationing of free speech on radio. This follows a Democratic push to gain ground in conservative-dominated talk radio. The Fairness Doctrine was enforced by
the FCC from 1949 to 1987 and required broadcasters to present both sides of controversial issues.
by Stewart Whitney and Fed Lucas, CNS News, June 28, 2007

This Week in News: Friday, June 22, 2007

Radio

Doyle Bill Would Encourage New Low-Power FM Stations
U.S. Rep. Mike Doyle introduced a bill on June 21 that could prompt hundreds of new low-power FM radio stations to sprout up around the country, including the Pittsburgh region. The bill would relax a restraint that prevents new stations from securing spots close to existing full-power commercial stations on the radio dial.
by Jerome L. Sherman, Pittsburgh Post-Gazette

New Measures Could Bring Influx of New Noncommercial Radio to the Airwaves
Hannah Sassaman of the Prometheus Radio Project joins us to talk about a series of developments that could result in the creation of hundreds – if not thousands – of new noncommercial radio stations. Legislation has been introduced that would allow the FCC to grant more licenses to low-power FM stations.
Democracy Now!, June 22, 2007

Clear Channel to Indy Musicians: Swap Exposure for Royalties
A settlement between the Federal Communications Commission and major broadcasters requires them to commit a certain amount of airtime to independent musicians. But Clear Channel Communications, one of the four broadcasters that settled, is asking independent musicians to agree to forgo royalties in exchange for the exposure.
by Neda Ulaby, National Public Radio, June 21, 2007

Conservatives Dominate the Airwaves
According to a new report that indicates conservatives dominate talk radio, "92 percent of the political talk radio programming on the stations owned by the top five commercial station owners was conservative, and only 9 percent was progressive."
Center for American Progress, June 21, 2007

Webcasting

Web Broadcasters Plan Protests Over Royalties
Live 365 Inc., Pandora Media Inc., and Yahoo Inc.'s Yahoo Music are going silent on June 26 in a "Day of Silence" to protest the increase the new royalty rates set to go into effect on July 15.
by Sarah McBride, Wall Street Journal, June 21, 2007

Day of Silence Nears, AOL, Clear Channel Remain Aloof
A broadening number of internet-based radio stations are now joining the June 26 Day of Silence, part of a larger protest against imminent royalty increases. The group now includes heavyweights like Yahoo, RealNetworks and MTV Networks, though titans AOL and Clear Channel Radio remain aloof.
Digital Music News, June 21, 2007

Webcasting Rate Hearing in Congress, Next Thursday
On Thursday, June 28, the House Small Business Committee will hold a hearing entitled 'Assessing the Impact of the Copyright Royalty Board Decision to Increase Royalty Rates on Recording Artists and Webcasters.' The hearing will examine the decision to raise rates, the impact it will have on Internet Radio, and the challenges of providing fair compensation for copyright owners while maintaining a business environment that allow small Webcasters to thrive.
Radio and Internet Newsletter, June 21, 2007

Net Neutrality

An Explosion of Comment on Net Neutrality
In the three-month period for public comment on Net Neutrality, over 11,000 people filed comments to the FCC, including private citizens, lobbyists, and companies like Google. Most of the comments favored the preservation of an open internet
ZDNet, June 21, 2007

FCC Commissioner Takes Brave Stand for Open Access
FCC Commissioner Jonathan Adelstein announced his support for open access internet and its importance in fostering competition.
by Timothy Carr, Huffington Post, June 21, 2007

Google Files Net Neutrality Pleas with FCC
Google filed 47 pages of comments on Net Neutrality last Friday. In the comments, Google outlines a list of what the company believes is okay and not okay for broadband providers to do in controlling the internet.
by Jason Lee Miller, WebProNews, June 19, 2007

2008 Candidates Split Over 'Net Neutrality'
Net Neutrality is a hot issue in the 2008 Presidential Election. Find out what the candidates are saying about it and if they're taking action in this article from NewsMax.
by John Mercurio, NewsMax.com, June 19, 2007

Music Industry

V2 Inks With Peter Gabriel's We7 for DRM Free Ad Supported Downloads
The download service We7 is offering free (and DRM-free) downloads. "The advertising attached to the music will ensure that artists receive royalties and consumers get and can share DRM-free music. After a period of time users will have the choice to have the track ad free and there's an option to buy the track ad free at a normal price."
Hypebot, June 20, 2007

The Record Industry's Decline
Rolling Stone examines the fall of the record industry in this two-part article.
by Brian Hiatt and Evan Serpick, Rolling Stone, June 19, 2007; Part 1 and Part 2

Politics and Hip-Hop Are Doing a Mash-Up
Newsweek’s Steven Levy discusses the legality of creating mash-ups with Congressman Mike Doyle and mash-up artist Greg Gillis (Girl Talk).
by Steven Levy, Newsweek, June 25, 2007 issue

Can Rap Regain Its Crown?
Although the entire record industry has been suffering as of late, sales of rap records have suffered more. Possible factors for rap's decline include the emphasis of selling singles over albums and the overall decrease of quality in recent rap.
by Steve Jones, USA Today, June 15, 2007

Copyright Law

WIPO Broadcasting Treaty Talks Break Down
At issue at this meeting was a proposal to increase the rights of broadcasters and cablecasters over their transmissions in order to prevent signal theft. The discussion stalled progressively as objections and alternatives to language in the chair’s unofficial draft treaty proposal piled up, sources said. Read more about the disagreements here:
IP Watch, June 22, 2007

Other

Required Reading: the Next 10 Years
Intellectual property and copyright law pioneer Larry Lessig announced that he is stepping back from his role in the copyright law community to focus on "corruption" related issues.
by Larry Lessig, Lessig Blog, June 19, 2007

The day the music dies

After decades of talking and singing about it, the date for the death of music has finally been set -- it's Tuesday. No, not really, but many webcasters including Live365, Launchcast, MTV, RealNetworks and others will pull the plug on their broadcasts that day to protest the looming increase in the royalty rates they pay. It is being billed as a "Day of Silence."


As we have written about before, many webcasters say the new rates are so high they will be forced off the air. The new rates are scheduled to kick on July 15th. Legislation is working its way through Congress that would knock down the new rates, which were levied by SoundExchange.

"On Tuesday, thousands of webcasters will call on their millions of listeners to join the fight to save internet radio and contact their Congressional representatives to ask for their support of the Internet Radio Equality Act," declared Jake Ward, spokesman for the SaveNetRadio coalition.