Whitacre is out at ATT

It's now become clear why ATT is pushing so hard to charge web sites for faster download speeds -- they have to pay for the ginormous retirement package of their CEO, Ed Whitacre, who announced he's stepping down today. I'm joking, but if you think your company's matching funds for your 401k look pretty good, check this out (from the Financial Times):

Mr. Whitacre will receive a retirement package totaling $158.5m according to the company's proxy filing with the US Securities and Exchange Commission – one of the largest pension packages ever unveiled.

In addition, he will receive $24,000 a year in benefits to cover car costs and $6,500 a year for home security, and will be entitled to use the company jet for 10 hours a month.

Of course, ATT and the other big telecoms plans to do away with net neutrality may have sailed forward, if it wasn't for Whitacre. Whitacre will be remembered by many for helping jump start the net neutrality campaign by making an incredibly boneheaded comment to Business Week in 2005 (he was then head of SBC). He's speaking of Google and other web content providers in the following graph:

"Now what they would like to do is use my pipes free, but I ain't going to let them do that because we have spent this capital and we have to have a return on it. So there's going to have to be some mechanism for these people who use these pipes to pay for the portion they're using.

Why should they be allowed to use my pipes? The Internet can't be free in that sense, because we and the cable companies have made an investment and for a Google or Yahoo or Vonage or anybody to expect to use these pipes free is nuts"

Net neutrality supporters have cited the comment so often many have probably memorized it. I even heard a rumor there's a song that samples the statement, but I haven't been able to track it down.

Judge rules against ASCAP on music downloads

A judge ruled yesterday that music download services (iTunes, AOL and the like) don't have to pay a public performance royalty to songwriters for music downloads. ASCAP had brought the action. Here's an interview with a Billboard reporter on the ruling and a deeper analysis at Film Music Magazine. Here's an excerpt from the Film Music piece that explains what it all means:

If not reversed on appeal or otherwise overturned, the decision could mean huge losses for composers who work under work-for-hire agreements on films and television shows as viewers migrate away from watching television "live" in favor of downloading films and TV episodes.

Apple's iTunes online store has already delivered over 18 million copies of films and television episodes via download. Film and television composers historically receive no royalties for DVD or videotape sales or rentals, and often depend on performance royalties from ASCAP, BMI and SESAC generated from public performances of music on television and elsewhere for their livelihoods.

The post Imus hip hop backlash

There's been a lot of angst about hip hop lyrics in the wake of the Don Imus firing. Sure much of commercial hip hop is misogynistic, homophobic and crassly commercial, but few commentators have taken a step back and asked why commercial hip hop is the way it is. Most have been content to lay the blame at the feet of rappers, like Snoop Dogg. It's akin to killing the messenger.

There is a vast universe of hip hop out there -- much of it positive and thoughtful -- but that's not what we hear on commercial radio or often see released on the major labels. To a large extent, the blame rests with the companies that are putting out the music, as Jeff Chang, an FMC advisory board member and hip hop historian, and Dave Zirin point out in an astute piece in the Los Angeles Times this week.

MUCH OF THE criticism of commercial rap music — that it's homophobic and sexist and celebrates violence — is well-founded. But most of the carping we've heard against hip-hop in the wake of the Don Imus affair is more scapegoating than serious.

Who is being challenged here? It's not the media oligarchs, which twist an art form into an orgy of materialism, violence and misogyny by spending millions to sign a few artists willing to spout cartoon violence on command. Rather, it's a small number of black artists — Snoop Dogg, Ludacris and 50 Cent, to name some — who are paid large amounts to perpetuate some of America's oldest racial and sexual stereotypes.

Later on:

Local hip-hop scenes are thriving. Great art is being made not just in music but in visual arts, film, theater, dance and poetry. It can be seen in the works of Sarah Jones, Nadine Robinson, Rennie Harris, Kehinde Wiley and Danny Hoch. Hip-hop studies is a rapidly growing and popular field at colleges and universities, with more than 300 classes offered. In hip-hop after-school programs, voter registration groups, feminist gatherings and public forums, the future of hip-hop is under discussion. These hip-hop thinkers want to take the culture that unites many young people and channel it toward political engagement. In 2004, voter registration campaigns using hip-hop to target youth produced more than 2 million new voters under the age of 30.

To confuse commercial rap made by a few artists with how hip-hop is actually lived by millions is to miss the good that hip-hop does. If hip-hop's critics paid attention to the hip-hop generation, they would learn that the discussion has already begun without them and that they might need to listen. Then a real intergenerational conversation could begin.

Word.

B4MD screening in Philly, May 7

Hey Philly readers.

On Monday, May 7, the Philadelphia Chapter of the Recording Academy is hosting a screening of the documentary Before the Music Dies. The movie tells the story of American music at a precarious moment when just a handful of companies dominate the radio waves and the retail racks. Filmmakers Andrew Shapter and Joel Rasmussen traveled the country, hoping to understand why mainstream music seems so packaged and repetitive, and whether corporations really had the power to silence musical innovation. Widely-praised and award-winning, the movie includes interview lots of musicians, industry folks and fans.

After the screening, FMC's Kristin Thomson will participate in a panel discussion on the effects of radio consolidation, changes to the music industry and artist development with director Joel Rasmussen and Marcy Rauer Wagman, Director of Drexel University's Music Industry program.

Before the Music Dies
Monday, May 7
International House, 3701 Chestnut Street, Philadelphia, PA
Doors at 6:00 PM
Admission is $10 for Grammy members and $15 for the general public.

Hope to see you there!

Everybody have fun (and make money) tonight

Wang Chung is a band most people probably haven't thought about in a long, long time. The group popped up a couple of days ago in an interesting article in the New York Times about artists re-recording their hits to earn more money.

According to the piece, Wang Chung plans to re-record their 1986 smash "Everybody Have Fun Tonight" so the band can take home more licensing revenues. This is how it works: typically revenues from licensing a song are split 50-50 between the artist and the record label (which owns the song) under most record contracts.

When a contract expires, an artist is free to re-record the music (although sometimes there's a 5-year moratorium on this in the agreement). The re-recorded music is solely owned by the artist, so he or she does not need to split the revenue. A 50 percent increase in licensing fees sounds pretty good, no? The article didn't mention this, but some artists are choosing to re-record songs that are popularly licensed for sampling.

The end of Internet radio?

That's the question some in the music industry are pondering after the Copyright Royalty Board denied a motion by webcasters' yesterday to rehear the new, higher royalty rates the board set for webcasting in March. The three judge panel denied the rehearing on procedural grounds saying the webcasters didn't present any new evidence that would warrant a new hearing.

Small webcasters have bitterly objected to the new rates saying they would put them out of business. Small webcasters will now have to look to the courts or Congress for relief. In an e-mail message yesterday, Tim Westergren, the founder of Pandora, summed up the situation this way:

The new royalty rates are irrationally high, more than four times what satellite radio pays and broadcast radio doesn't pay these at all. Left unchanged, these new royalties will kill every Internet radio site, including Pandora.

The webcasters have formed a group called SaveNetRadio to lobby for lower royalty rates.

It would be devastating to lose small webcasters. With commercial radio sounding the same from coast to coast, small webcasters have been a great outlet for independent music and genres that normally don't show up on the commercial airwaves (say jazz).

The problem is that a "one size fits all" royalty system does not make sense on the web. The Royalty Board should recognize there's a vast difference between a small one man/woman web radio station and AOL. That's why a tiered system makes the most sense: charge the big boys one rate, and the small webcasters a lower rate. This ensures artists get paid and we keep the really great small webcasters on the air, er web.

D.C. Policy Day is almost here

It's a bit of an understatement to say technology is having a huge impact on the music industry. Anyone remember those things called CDs? Sure, I'm being a little facetious, but music downloads, H.D. radio, DRM, net neutrality, and a range of other technologies are fundamentally changing the way we get, listen and make our music.

The Future of Music Coalition is jumping into this fray with "The Technology and IP Policy Day." The May 2 event will feature Microsoft, BMI, Pandora, XM, the U.S. Copyright Office, R.E.M. advisor Bertis Downs and other top experts debating about what all this change means, and how it will impact the industry. The experts will discuss the shake up in the satellite and terrestrial radio market, the battle over net neutrality, and the impact of a whole gaggle of new music downloading services. It's safe to say there has never been a more interesting time to discuss the intersection of music and technology.

Here's the really great part: the conference is cheap! Go here to register.

It's official: payola settlement is a done deal

The F.C.C. officially announced today that it has reached a settlement with a number of broadcasters over allegations that they were engaging in payola -- paying record stations to play their music.

The terms have been widely reported over the last month, but it's worth taking a look at some of the details again. To resolve the allegations, CBS Radio, Citadel Broadcasting Corporation, Clear Channel Communications, Inc. and Entercom Communications Corp. have agreed to pony up $12.5 million and provide more than 4,000 hours of air time to local and independent artists. They will also face tighter regulations.

•Maintain a database containing a record to identify all items from record labels that exceed $25
•Maintain a company hotline for employees to call the Compliance Officer to obtain advice and report violations
•Appoint a Corporate-level Compliance Officer who is responsible to ensure compliance with the Consent Order, and all sponsorship identification laws
•Designate a Compliance Contact for each market
•Conduct annual training for all programming personnel and supervisors

Sure we would have liked more air time for independent artists, but all things considered this is a historic day in the fight against payola. Payola and radio consolidation have turned commercial radio into a bland, homogenized format that largely ignores independent musicians and whole genres of music such as jazz and bluegrass. This agreement signals a possible new direction for commercial radio and more options for radio listeners.

“Unfortunately, payola has become as common a feature of commercial radio as shock jocks and 18-song sets. It is an encouraging that the F.C.C. and broadcasters are working together to root out a problem that keeps deserving, independent bands off the public airwaves,” said Jenny Toomey, executive director of the FMC.

Here's a link to FMC's full press release.

FreeConference breaks the roadblock

Interesting development in the case of AT&T, Sprint, Verizon and Qwest vs. FreeConference.Com, which we reported on last month (see below). FreeConference says Qwest and Cingular have stopped blocking their calls after an angry outpouring from customers.

FreeConference is a web-based service that allows users to make conference calls with a single long distance call. The telecoms began blocking FreeConference claiming the service was pulling a quick one by exploiting a loophole in telecommunications law. They said multiple people were never intended to be connected on one line. FreeConference officials said what they were doing was perfectly legal, but the telecoms were actually worried about all the business they were losing to the upstart.

The blocking generated loud complaints from consumer groups. Here's an excerpt of an e-mail from FreeConference:

Based on what Cingular's Office of the President describes as "an overwhelming response from customers", they have ceased blocking calls to our service. Qwest has also stopped blocking. This is all due to the loyal support you have shown FreeConference by protesting these carriers' actions directly. Over 4,000 of you responded to our last note and went directly to the FCC site to register a complaint!
As reported in the LA Times, the FCC has said that ALL call blocking actions will cease until they can permanently resolve these service issues with AT&T/Cingular, Qwest, and Sprint.

It's hard not to see the whole thing as a cautionary tale with implications for net neutrality. Net neutrality supporters have always worried the big telecoms might resort to blocking web sites of rival businesses. The customer would lose by having fewer choices. Of course, the FreeConference incident involves phones not the Internet, but if the telecoms are willing to block calls why not web sites?

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.

Want a radio station?

The FCC has just announced a new window to apply for non-commercial educational radio (NCE) permits. To cut through the bureaucratic jargon, an NCE station is one that has a mission to educate on a particular topic. That includes non-profits, arts organizations and the like.

The announcement is a little unusual in that the FCC has given groups six months to prepare for the window (it runs from Oct. 12 to Oct. 19). If you're looking for a station in a major metropolitan area, you will most likely be out of luck. With that said, there are a lot of opportunities available in more rural areas of the country. Preference is given to local groups that meet certain criteria. An application takes about two months to put together and can cost $1,000 to $5,000, but it's a great opportunity for the right group -- especially when radio consolidation has rendered much radio programming bland and homogenized.

The good folks over at Prometheus Radio Project can help with advice on your application.

Tanglin' with Clear Channel

FMC released a study last year called "False Premises, False Promises" that quantified the destructive impact consolidation had on the radio industry. The report has been quoted at length in the media, but here are a few salient points:

The "localness" of radio ownership – ownership by individuals living in the community -- has declined between 1975 and 2005 by almost one-third

Just fifteen formats make up three-quarters of all commercial programming. Moreover, radio formats with different names can overlap up to 80% in terms of the songs played on them.

Niche musical formats like Classical, Jazz, Americana, Bluegrass, New Rock, and Folk, where they exist, are provided almost exclusively by smaller station groups.

Why are we rehashing old reports?

For people interested in radio consolidation, there's a poignant companion piece to the study that puts a human face on radio consolidation. USC Professor Jerry Del Colliano documents his personal run in with Clear Channel via a lawsuit. Del Colliano said he was sued as publisher of Inside Radio magazine after he came out strongly against radio consolidation. In the end, he was forced to sell Inside Radio. To whom? Take a guess. . . Clear Channel. Del Colliano asks the reader to make his or her own conclusions about the reasons Clear Channel sued him, but it's an interesting cautionary tale.

DRM dealt major blow

Another day, another major blow to DRM. EMI and Apple just announced a deal to distribute the label's music via the iTunes web site without DRM. This is a significant move because the major labels had expressed a strong commitment to DRM (although there had been some signs of fraying recently -- see the SNOCAP posting below). There are several basic technological questions that have not been answered, but it appears a sea change is in the works on the DRM front.

iTunes will begin selling the DRM free tracks in May and other music download sites will follow thereafter. The price for the tracks will be $1.29, instead of the usual $.99. The sound you hear may be the other majors scrambling to follow.

Not keepin' it real on net neutrality

Normally, the FMC doesn't take things personally. We've been attacked repeatedly for stands we've taken on a range of issues. It just comes with the territory. But when a lobbyist who runs an operation funded by the telecom industry (which wants to do away with net neutrality) attacks a new net neutrality campaign (Rock the Net) as "lip synching" for liberal groups, it begs a simple question:

Who is the real Milli Vanilli?

Sorry Scott Cleland, it's definitely not Rock the Net. We have no problem with MoveOn, but this is a coalition founded by musicians, record labels and music fans to promote the principles of an Internet that is equally open to everyone.

Cleland calls Rock the Net a "cheap publicity stunt" and implies that Rock the Net is manufactured. The sheer number of bands and music labels -- more than 230 as of this afternoon -- show there is nothing cheap or manufactured about the campaign.

Actually, we aren't taking it personally. The attack -- as full of false information as it is -- is useful in a way. It shows just how manufactured the campaign against net neutrality is. When the only negative comment we could find about Rock the Net comes from a telecom shill, it
makes clear just how much support the anti-net neutrality folks have.

So Scott, stop parroting the telecoms. It's time to start keepin' it real!

(Disclaimer: the FMC apologizes to Milli Vanilli for associating them with a faker like Scott Cleland.)

Rock the Net!

It's official. After months of work, the "Rock the Net" campaign officially launched today. For those that don't know, Rock the Net is a coalition of musicians, music labels and fans pledging their support for the concept of network neutrality.

The roster of musicians that have already signed up include R.E.M., Sarah McLachlan, Ted Leo, Death Cab for Cutie, Boots Riley of The Coup and many, many more. In these opening moments of the campaign, things already look pretty good already -- nearly 150 artists and labels have joined. The effort has also got some attention in the blogosphere. Here are some early reports from The Washington Post tech blog and Wetmachine.

Rep. Edward Markey, D-Mass., spoke at a teleconference this morning announcing the launch. He said he would be working to pass legislation in support of the concept of net neutrality.

“The wonderful thing about the Internet is that no one has to ask to anyone’s permission to get their voice heard, to launch a service, to communicate with fellow citizens,” Markey said.

We couldn't agree more.

Telecoms block conference call service

There is an interesting bit of news from Consumer Affairs this week that should sound eerily familiar to anyone concerned about net neutrality. AT&T, Sprint, Cingular, and Qwest have begun blocking subscribers' access to FreeConference.com, a web-based service that offers conference calls for the price of a single long distance call.

Apparently, the telecoms weren't happy about the success of FreeConference, which according to the article, has become quite popular with a number of small businesses and non-profits. AT&T officials also claimed FreeConference violated the terms of its service, saying multiple people were never intended to be connected via a single phone call. Qwest has gone a step further and sued FreeConference and another similar service claiming they have cost the telecom $10 to $15 million by exploiting a loophole in telecommunications law. (The reasons are to complicated to explain here, but see the article in Consumer Affairs).

Naturally, FreeConference said AT&T is simply trying to steer customers back to its conference calling service. Consumer groups have cried foul over the move saying it limits people's choices to legitimate businesses.

With mobile phones becoming a more and more popular choice for music downloads, it will be interesting to see if mobile providers follow suit and consider blocking downloads from certain music providers that they are not aligned with.

The affair also underscores the power of telecoms and why net neutrality is so important. If the big telecoms are willing to interfere in phone service, why not Internet service as well? Of course, AT&T has signed a two-year commitment to net neutrality to gain approval of its merger with BellSouth, but some believe that might not apply to all of its offerings such as TV over the Internet.

A brief history of copyright

Kurt Hanson over at Radio and Internet Newsletter offers an excellent (and expansive) rundown on the history of copyright law leading up to the recent decision by the Copyright Royalty Board to set higher royalty rates for webcasting. The history is to long to quote, but Hanson rightly diagnoses (with one major caveat) the problem with the ruling:

"And thus we end up with a situation in we're in right now, in which a trio of judges granted the copyright owners a royalty rate from Internet radio that is effectively, I believe, more than 100% of the total industry's revenues!...

Clearly the process has spun off the rails. Particularly if the CRB decision drives Internet radio off the air, the public clearly doesn't benefit, meaning that the purpose of copyright law is not being served.

The purpose of Congress granting copyright protections is supposed to be to maximize the availability of creative output to the public. In other words, from the copyright owner's side, it's supposed to encourage bands like Clap Your Hands Say Yeah to keep recording music, and from the copyright user's side, it's supposed to encourage the development of new services like radio station's Internet simulcasts and "B" channels and LAUNCHcast and AccuRadio and Live365 and Radio Paradise and Pandora. When both sides are doing what they do, the public benefits. Copyright law is not supposed to shut down an entire industry."

Hanson is right in this section -- the higher royalty rates will doom many webcasters who are exposing independent artists and music genres that don't receive much attention. Losing them will move the Internet one step closer to the bland homogenization of commercial radio. But he goes to far when he seems to imply later in the conclusion that webcasters do not owe artists any digital performance royalties.

As the FMC points out in its new position paper on the webcasting ruling, the problem is not paying artists royalties, but a "one size fits all" system that charges small webcasters like LAUNCHcast and large commercial radio stations the same royalty rate. There should be a balance. Small webcasters should pay a lower royalty rate -- one that won't knock them off the air. Large commercial stations, who can afford the higher rate, should pay it. This is the best approach for ensuring artists and small webcasters continue the explosion in creativity we have seen online in the last decade and both benefit from the proceeds.

A turning point on DRM?

Fans and artists who are less than jazzed by major entertainment companies using DRM technology to lock up digital media have reason to be a little optimistic this month.

At South by Southwest last week, SNOCAP announced it had reached deals with major indies Sub Pop, Dangerbird and New Line to distribute their music via MySpace without DRM. As TechCrunch astutely points out, these labels operate under the umbrella of Warner, one of the nation’s biggest music groups. Last Fall, SNOCAP inked a deal with MySpace to allow artists to sell their music via their MySpace pages without DRM technology.

With the sheer number of people that will buy music through MySpace, this could be a sign that the major labels are losing the DRM war. View the SNOCAP press release. Incidentally, artists can actually get more money for the CD sales by registering for SNOCAP as part of CD Baby Digital Distribution. (Artists get about 3 cents more a track and don't have to pay annual fees, according to Derek Sivers at CD Baby).

EFF knocks down bogus Clear Channel patent

Clear Channel has cornered the market on the nation’s radio stations, but it won’t be able to extend that domination to digital recordings for live concerts. The U.S. Patent and Trademark Office has stripped Clear Channel of a patent it had held on a system for creating digital recordings for live performances.

The move was announced last week by the Electronic Frontier Foundation, which staged a campaign to overturn the patent. Clear Channel claimed the patent gave it a monopoly on all-in-one, digital post-concert recordings, and the company threatened to sue anyone that made such recordings, according to EFF.

EFF’s investigation of the case turned up a really interesting fact: apparently a company called Telex had developed similar software more than a year before Clear Channel filed its patent. Here’s a link to a press release and the decision from the patent office.

Net neutrality ninja style

Sure, net neutrality is key to independent musicians, small businesses and anyone who cares about keeping the Internet the way it is, but breaking it down in simple terms can be devilishly tricky. Not anymore.

Thanks to "Ask a Ninja," here's a short primer on net neutrality that anyone can understand. Of course, only the ninja could work in references to Robin William's cousin making bacon juice, a girl with a hotdog on a stick, and fried cheese. En garde!