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New Legislation May Save Internet Radio

The future of Internet radio in the U.S. was cast into doubt after the Copyright Royalty Board refused to reconsider new rates that would cost most online stations more than they make in a year. But a bill was introduced into the House of Representatives on Thursday that may save the stations from financial death.

According to the Radio And Internet Newsletter, Representative Jay Inslee (D-WA) introduced the Internet Radio Equality Act Thursday afternoon in an effort to prevent what many see as the forced end of Internet radio through excessive royalty payment rates. Additional co-sponsors are expected to join Rep. Inslee soon.

In early March the Copyright Royalty Board approved a change to the royalty payment schedule Internet radio stations must follow. Instead of the 10 to 12 percent of gross income the stations had been paying, they would be required to pay per performance retroactively back to 2006 - costing most stations about 125 percent of their annual income.

The royalty rates as proposed by to the board by the RIAA's digital music collection organization SoundExchange were also designed to ramp up through 2010 to more than twice the retroactive 2006 rates.

"Because a typical Internet radio station plays about 16 songs an hour, that's a royalty obligation in 2006 of about 1.28 cents per listener-hour," said Kurt Hansen from the Radio And Internet Newsletter. "In 2006, a well-run Internet radio station might have been able to sell two radio spots an hour at a $3 net CPM (cost-per-thousand), which would add up to .6 cents per listener-hour."

If passed, Rep. Inslee's bill will nullify the CRB rate change, and changes the royalty rate setting standard for Internet radio arbitration to a model that balances the needs of copyright owners, copyright users, and the public as opposed to a "willing buyer/willing seller" model. It also offers Internet radio stations the same royalty options as satellite radio: Either $0.33 per listener hour, or 7.5 percent of annual revenues.

This legislation is exactly what Internet-based stations have been hoping for since their requests to the CRB for affordable royalty rates fell on deaf ears. The CRB's new rate plan is scheduled to go into effect on May 15, which gives legislators only a couple of weeks to fast-track the bill into law.

Should the Internet Radio Equality Act fail to pass, most online radio stations will go silent since they simply don't make enough money to pay the royalty fees. And should the CRB royalty plan stand, the board will likely set its sights on traditional terrestrial radio stations next.

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A guest said: (hide)

Yet another assumption that the sherriff has the right to milk the population. Why don't all internet radio stations just move offshore like the pirate stations did in the 70's? I'm a musician and sound engineer but I refuse to even join the leeches who call themselves performing rights societies. Let music be played freely as they do in south america, then let the artists make their money from concerts... This does however, mean that the big guys selling cds and online music will take a dive but, hey, the needs of the many against the profits of the few!!!

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Biff said:

member since 08 Apr 2004 with 1479 posts, unranked, send him a message or view his profile

LOL. Yeah guest, the US Government's job is to tell artists whether or not they can sell their work for money. Wait we are talking about the US here, right? You might wanna pop open a history book and take a look at why socialism tends not to work, my friend.

But I definitely take you more seriously since you play in some random band and sometimes record your own tracks. Let me guess, you don't make a living off your music, do you? Yeah thats what I thought.

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A guest said: (hide)

Making a living is one thing. You as an artist can't make a living if you drive all of your sponsers who play your music for people to hear into the ground. So people in turn can't go out and tell there friends and buy your CD's or downloads. Without radio many artists would never be recognized or be famous. There has to be a balance here and right now charging 125% and double that in the future isn't going to cut it.

The RIA is making to much money as it is. Why don't they give a little more compensation to the artists themselves instead of driving internet radio out of business who was in fact helping them sell there recordings. It makes no sense at all!

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Biff said:

member since 08 Apr 2004 with 1479 posts, unranked, send him a message or view his profile

Well ok now we're getting into a more logical realm than just saying all music should be free. I'm still a little suspect though. I'm not sure you are qualified to speak for those who make music for a living. Although your heart is certainly in the right place.

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DaiMac said:

member since 29 Jun 2001 with 952 posts, unranked, send him a message or view his profile

Biff wrote:
You might wanna pop open a history book and take a look at why socialism tends not to work, my friend.

History is always written by the "victors", is it not? Except hmm, isn't it funny that our own society, a much more advanced industrial (and increasingly informational) society than either Russia or China when their revolutions occured (the two _primary_ examples of "failed" socialism/communism), most closely resembles the prediction of Marx for the "ideal" breeding ground for just such a revolution? We have a relatively educated, well armed populace that is just beginning to realize that maybe having 90% of the economy in the hands of 1% of our population isn't the best system after all, and that maybe no portion of our existing political establishment is really willing to do anything to change that. Whether you like it or not, the seeds are definitely there...

Just pointing out that perhaps (as you astutely recognize its threads in our guest's viewpoint on music) socialism isn't as dead or failed as your comment might be seen to imply.

Now that has nothing to do with Kim Jong Il being bats&#$ crazy, I personally blame all that Hennessey, and therefore ultimately the French (who currently give socialism a bad name)

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Rainy Day said:

member since 07 Jun 2005 with 607 posts, unranked, send him a message or view his profile

For those not keeping track, the score is:

Guest 3

Biff 0

DaiMac 3

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A guest said: (hide)

Biff wrote:
I'm not sure you are qualified to speak for those who make music for a living. Although your heart is certainly in the right place.

I don't see how qualifications come into it - what are your qualifications? How do you speak for me (a different anonymous "guest") as a performing and composing musician? The thing of it is, it doesn't take any qualification, just a little common sense and a little research.

A musician can't make money from music that no-one hears. Quashing the smaller independent internet radio stations restricts exposure to only those channels that can afford to do so, and the large broadcast networks will not explore as broadly as the independents. When you're paying such onerous penalties to do so it doesn't make sense to play anything that isn't already known. You play the top artists. You choose them from what you're given by the label representatives, who show up every so often with new product and encourage you to play it on your station.

Those working for the CRB and RIAA know beyond a shadow of a doubt that these royalty rates will shut down independent internet radio. They're not stupid, they just don't care. I can only imagine that this is what they want to happen. They are not in the business of protecting the musician, they represent the record labels. They're not in the business of making music for a living, they're in the business of publishing. They're not interested in artists, they're interested in superstars. That mentality is served best by fewer artists and fewer avenues of exposure. In other words, selling 1,000,000 units from "Band X" is better than selling 500,000 from "Band Y" and another 500,000 from "Band Z". There's less money spent on marketing and touring.

(There's a good piece on this at http://www.bit-tech.net/columns/2007/04/21/can_you_hear_me_now/.)

CD sales aren't slumping as much some might think, but the spectrum of artists selling CDs is broadening. And even the numbers reported by the RIAA show that their slump began after Napster was shut down (which is an issue parallel to Internet broadcasting, but by no means identical). And, further, their numbers show that much of the "lost" CD sales revenue is shadowed by revenue gains for music on DVD and download sales. Not to mention the CDs sold and not tracked by the RIAA or their ilk, stuff sold directly by the musician, at their concerts, or digitally from their websites. Or by music publishers not affiliated with the corporate collectives.

In Canada, there is a schism between growing between the independent and major labels. Recently, 6 of the independents have dropped out of the CRIA.

Speaking of publishing ... how about the opinions of Nettwerk CEO Terry McBride? Nettwerk artists include Sarah McLachlan, Avril Lavigne, and The Barenaked Ladies. He's qualified. Nettwerk is opposed to DRM and the only artists that have DRM files for sale under Nettwerk do so because they are restricted by co-signed deals with other labels (such as Avril Lavigne). Terry McBride said in interview (on G4TV's "The Lab") that the label and the artists make more money when exposure to the material is not limited. I think it's fair to examine Nettwerk's deal with the social radio and music network Mercora. The press release is at http://www.mercora.com/pressreleases/release_09052006.asp.

But what about the musician's perspective?

John Rzeznik of the Goo Goo Dolls said in an interview: “Our last record sold maybe 800,000 copies – we didn’t make any money. None. Not one penny from record sales. Imagine if we weren’t able to go out and tour and make money on tour. What would we have done? We would have had a gold record and go out and get jobs.” Rzeznik knows where his money is coming from, and it's not from radio royalties or retail chain sales. That's just not how recording contracts are written.

[quote="Biff]You might wanna pop open a history book and take a look at why socialism tends not to work, my friend.[/quote]

I don't agree that the very first post is not saying that music should be given away for free on demand. What it says to me is that the cultural and economic benefits of allowing the music to be played free outweigh the economic benefits and cultural penalties of usurous royalty fees. It's the balance between more artists making more money by getting more exposure and the large corporate labels making more money from publishing royalties and less from diversified music sales. Frankly, radio exposure isn't socialism it's free advertising. And if capitalism can't profit from free advertising. Personally, I don't see that a reasonable royalty rate paid by a broadcaster is unreasonable, but still even without a royalty structure the publishers and especially the musicians benefit.

I've rambled a lot, and I've skipped over some connections. I've touched upon some issues that relate more to DRM and P2P issues but that is because I see how they are connected, and that is partly due to RIAA releases stating that their official concern is that digital broadcasts can be recorded, subverting the DRM distribution models. Effectively, the RIAA has expressed that Internet radio enables digital theft. This is not a perfect essay, but merely an educated opinion with a dash of rant.

But I say - don't be fooled. What the RIAA and CRB are pushing for is not about protecting the musician, it's about controlling and defining the market. I encourage everybody to do their own research.

A few websites and blogs you might find interesting (if you found any of this interesting):

http://excesscopyright.blogspot.com/

http://www.digital-copyright.ca/

http://www.digmedia.org/

http://www.savenetradio.org/

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