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Clip: The war on webcasting

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  • Carl Z.
    Pay Per Play A new royalty scheme for webcasters may shut most of them down. By Miles Raymer
    Message 1 of 1 , May 3 5:27 PM
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      <http://www.chicagoreader.com/features/stories/sharpdarts/070504/>

      Pay Per Play

      A new royalty scheme for webcasters may shut most of them down.

      By Miles Raymer
      May 4, 2007

      THERE'S A REASON you haven't seen much in-depth coverage of what's
      probably the most important federal ruling to affect the music
      business since the Digital Millennium Copyright Act of 1998 -- a
      ruling that, if it goes into effect, will change how tens of millions
      of people listen to music and very possibly silence Internet radio
      altogether. The reason is it's painfully boring. To weigh in with more
      than a sound bite, you've got to navigate legislative language that
      even the most impassioned players in the debate admit is difficult and
      dry. But all that legalese is hiding an ugly truth: the music
      industry, led by the RIAA, has once again enlisted the government to
      do its dirty work. This time it may very well have derailed the
      evolution of radio into the digital age.

      On March 2 the Copyright Royalty Board -- three judges who determine
      who pays how much for the use of copyrighted materials -- handed down
      new regulations for webcasters to cover the period from 2006 till
      2010. (Webcasting can mean anything from an online simulcast by a
      conventional broadcaster to a customizable streaming service like
      Pandora to a personal Internet radio station run from a laptop.) The
      rates are the same as those proposed by SoundExchange, a
      royalty-collection agency that spun off from the RIAA in 2003 and
      still has RIAA employees on its board; in fact the judges appear to
      have accepted the industry's highball opening offer. An appeal for a
      rehearing, made by a coalition including NPR, was rejected April 16.
      If back royalties based on the new rates come due July 15 as
      scheduled, experts in the field say it's likely that even giants like
      Yahoo! and AOL will shut down their webcasts.

      Presently small webcasters pay a percentage of revenue as royalties
      and big ones pay per listener-hour. The new ruling requires an
      across-the-board switch to a per-play model and a steep rate hike. The
      retroactive rate for 2006 is $.0008 for each song increasing to $.0019
      by 2010, paid not just per play but per listener. Local webcasting
      company AccuRadio (accuradio.com), which last year posted revenues of
      roughly $400,000 and has an average audience of just a few thousand,
      would owe about $600,000 for 2006 under the new rules. Another
      regulation sets a $500 minimum fee per channel -- not a big deal for
      AccuRadio, which has 300 channels or so, but bad news for services
      like Pandora, where millions of users can create up to 100 channels
      apiece.

      AccuRadio was launched in 2001 by some of the same people who founded
      the Radio and Internet Newsletter, an industry news site
      (kurthanson.com) that's been around since 1999 -- basically since
      there's been a webcasting industry for it to report on. Paul Maloney
      is editor of RAIN and vice president of music development at
      AccuRadio; Daniel McSwain is assistant editor at RAIN and music
      director at AccuRadio and also runs his own site, Future Perfect
      Radio. As longtime webcasters and observers of the business, they know
      as much about the current situation as anybody. As a couple of guys
      about to lose their jobs, they are pissed.

      Many members of Congress, says Maloney, "are very much not in touch
      with the cutting edge of technology. And I say 'cutting edge,' but
      even things that people take for granted day to day. Cell phones,
      Blackberries, instant messaging." (Remember Ted Stevens, the
      Republican senator from Alaska, and his "series of tubes"?) And
      because they don't understand the digital world, he says, they're
      easily manipulated by lobbyists for digital businesses. The DMCA is
      one famous result: it gives the home-electronics and entertainment
      industries unprecedented control over how consumers can use products
      they've legally purchased and even criminalizes acts that don't
      infringe on copyright, like breaking DRM to make a fair-use copy of a
      song. "Lawmakers don't write these laws. Lobbyists write these laws,"
      says Maloney.

      In 1995 webcasting existed mostly in theory, but the RIAA was already
      lobbying Congress to regulate it. Existing laws didn't allow labels to
      collect per-performance royalties when their songs were played on the
      radio -- composers and performers got paid, but labels were considered
      compensated by the promotional value of the broadcast. The RIAA argued
      that Internet-based radio would be a completely different animal and
      persuaded Congress to pass the Digital Performance Right in Sound
      Recordings Act of 1995, which lifted the per-performance ban for
      webcasting based on the labels' claim that it "has no promotional
      effect on record sales."

      According to a recent survey by media-research group Arbitron, roughly
      52 million Americans now listen to webcasts each month (the
      satellite-radio industry claims just 14 million subscribers). But John
      Simson, executive director of SoundExchange, says he still doesn't
      believe that Internet radio helps music sales, as he told an
      interviewer for online trade publication RoyaltyWeek: "Even though you
      don't get the exact song you want there are so many channels and so
      many people out there that you can pretty much get what you want when
      you want it or that you're [sic] listening experience is one that is
      so rich that you don't need anything else."

      Considering that the RIAA is supposed to help the major labels, its
      efforts to squelch Internet radio are counterintuitive -- there's no
      hard data about webcasting and record sales, but it just seems
      reckless to dismiss 52 million listeners. "If you were to talk to
      someone who works in promotion for a major record label off the
      record," Maloney says, "I'd bet you they'd agree with us." He suspects
      the majors support the CRB ruling because they're planning to set up
      backdoor deals with webcasters. Nothing in the law forbids copyright
      holders from waiving or modifying royalty fees on a case-by-case
      basis, which a label could agree to do in exchange for a promise that
      a webcaster would play certain artists. This would allow the industry
      to "dictate the look and sound of play-lists," according to McSwain.
      "It takes away any autonomy from webcasters and puts it completely in
      the labels' hands."

      McSwain and Maloney are also pretty sure the new royalty rates are an
      indirect way for the majors to strike a blow against the indies.
      Tech-savvy early adopters -- those most likely to use webcasts -- tend
      to listen to music from outside the mainstream. SoundExchange denies
      that its goal is to shut down Internet radio, but the fact remains
      that doing so would eliminate an outlet where indies have a big leg up
      on the majors. Though the RIAA only represents the Big Four,
      SoundExchange collects royalties on behalf of all copyright holders
      whether they claim them or not -- which means it can take action even
      against webcasters who traffic exclusively in content from indie
      labels that would prefer to let things slide. To prevent such action a
      webcaster would have to negotiate exceptions with each label
      individually. "To eliminate the amount of digital competition in a
      field where [the majors] are not established, instead of trying to get
      into it, they're saying 'Fuck it. Just go away and we'll keep doing
      what we're doing,'" says McSwain. "If you don't stop this thing from
      happening now, there's no telling what future rulings will take away
      from you."

      What might stop it is the Internet Radio Equality Act, H.R. 2060,
      introduced April 26 by Washington Democrat Jay Inslee and Illinois
      Republican Donald Manzullo. The law would nullify the CRB's ruling and
      put webcasting on the same footing as satellite radio -- that is, with
      a royalty rate of .33 cents per listener-hour or 7.5 percent of total
      revenue, chosen by the provider. (According to estimates by tech site
      BetaNews, AOL would owe $916,000 for 2006 under H.R. 2060, as opposed
      to $23.7 million under the CRB's scheme.) July 15 may seem a ways off
      -- until this Tuesday the deadline was May 15 -- but Maloney and
      McSwain urge everyone to call their representatives in Congress now.
      The two went to Washington earlier this week to lobby legislators
      face-to-face, and they plan to return. Saturday at Subterranean
      there's a show to raise awareness about the issue, hosted by Radio
      Free Chicago and savenetradio.org (a good source for updates). And
      Tuesday, May 8, the webcasting industry is planning a Day of Silence,
      for which many major webcasters will go off-line in protest.

      If we lose webcasting, we'll lose one of the best resources available
      to people who really care about music. As Maloney puts it: "When was
      the last time you heard anyone say, 'I'm pretty happy with the choices
      on AM and FM, and I don't need anything else'?"
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