Monday, March 05, 2007

RIAA trying to kill internet radio

Faithful readers of LTR know that this blog does not necessarily limit itself to liberal and progressive talk radio. Quite often, the worlds of independent media and emerging technology are covered here, as these often have much to do with the ability of the general public to be able to become a part of the overall media process. Unfortunately, independent internet radio as we know it may be in danger, following a ruling on Friday, and this development could affect the creation and development of new media.

In a move that could potentially cripple small and medium-sized internet radio services immensely, the Copyright Royalty Board (CRB) on Friday made a decision on Internet radio royalty rates, rejecting all of the arguments made by webcasters and instead adopting the "per play" rate proposal put forth by SoundExchange, the digital music fee collection arm of the Recording Industry Association of America (RIAA). In short, this move could kill webcasting as we know it.

Further adding insult to injury, the rates will be retroactive to the beginning of 2006, and will be significantly higher than laid out in a similar May 2002 royalty edict (the CARP ruling). And these new rates will increase drastically from year to year.

The new rates are as follows:

2006
$.0008 per performance
2007
$.0011 per performance
2008
$.0014 per performance
2009
$.0018 per performance
2010
$.0019 per performance

A "performance" is defined as the streaming of one song to one listener; thus a station that has an average audience of 500 listeners racks up 500 "performances" for each song it plays.

The minimum license fee is $500 per channel per year. There is no clear definition of what a 'channel' is for services that make up individualized playlists for listeners. For noncommercial webcasters, the fee will be $500 per channel, for up to 159,140 ATH (aggregate tuning hours) per month. They would pay the commercial rate for all transmissions above that number.

Participants are granted a 15 day period wherein they have the opportunity to ask the CRB for a re-hearing. Following that will be the usual back-and-forth before it could become official.

So, what does this all mean to you and I? Well, if you enjoy listening to music on internet radio, your favorite online station could shut down. The big guns of streaming audio, Microsoft, Yahoo and AOL, could withstand this, since streaming is only a minor part of their massive business interests. The next tier, which would include services like Live365, will feel a serious pinch. And many well-revered services, such as SomaFM, Radioio and Radio Paradise, may be kaput. Or they may go the KPIG route and start charging subscription rates to hear their stream (they have since ditched this model). The next level down are the small hobbyists with Shoutcast or Live365 streams. If they're running a legit operation (i.e. forking over royalty fees to the RIAA), chances are they won't be able to weather the change. They'll either shut down or go underground. Or limit their playlists to non-RIAA material, which will effectively limit what they can put on the 'air'.

And while some of these webcasters rely on donations or advertising to help offset expenses such as equipment, bandwidth, etc., they are far from massive profitable enterprises. Many of them are hobbyists, doing it as a labor of love, such as Bill Goldsmith, who runs Radio Paradise with his wife and stepson. The station is a non-profit small business, and is a full-time job. He doesn't expect to get rich off it, but he is living the American dream of making a living doing something he loves. What kind of impact will the new rates have on Goldsmith and other independent webcasters? Well, they'll effectively run them all out of business.

Goldsmith sees the whole system as highly unfair, in that the RIAA, representing the 'Big 5' record companies, extracts so much money from webcasters, while collecting nothing from owners of terrestrial radio stations. Yes, you read that right - companies such as Clear Channel and CBS pay nothing to the RIAA. In fact, record labels will sometimes illegally pay station owners such as Entercom and Citadel to air their music, as the most recent payola scandals that rocked the industry showed.

The RIAA's argument for demanding fees from webcasters rather than terrestrial providers is that webcast stations are merely providing "perfect digital copies" of individual songs to listeners, rather than creating traditional radio programming. Goldsmith thinks this is hogwash, and it most certainly is. Nobody with even a limited knowledge of computers can say that a song on a webstream is a 'perfect digital copy', unless they're streaming at a 14,400kbps rate, which would be highly impractical. Most stream anywhere from 64-128kbps, a highly compressed rate.

The new rates could easily eat up roughly 125% of Radio Paradise's income, according to Goldsmith. And he feels his hands are tied, as the recording industry and Congress are ignoring the plight of small webcasters.

SomaFM, a highly popular webcaster with multiple streams dedicated to electronic, ambient, lounge and alternative country music, had already run into problems with the RIAA's heavy-handed ways. Following the 2002 CARP ruling, the webcaster was effectively forced to shut down temporarily, since they could not handle a $15,000 per month royalty bill. SomaFM's owner, Rusty Hodges organized a letter-writing campaign and even testified before Congress. The grassroots effort persuaded Congress to pass the Small Broadcasters Amendment Act, which enabled SomaFM and others to negotiate a more reasonable rate with the RIAA and return to webcasting. SomaFM and Radio Paradise, among others, currently pay roughly 12% of income to the RIAA.

The RIAA has long had an uncomfortable relationship with the internet. Since the peak of Napster and other file sharing organizations, the RIAA has virtually declared war againts these companies and even engaged in what some would call 'Gestapo-like tactics' in going after people suspected of downloading music via file sharing. They have tried to sue children, dead peoples' families, the terminally ill and even an 83-year old woman they suspected of downloading rap music. Granted, the makers and distributors of music do deserve to get paid on it, but heavy-handed tactics such as this have alienated the recording industry from the many people who have supported them in the past. Even former RIAA head Hilary Rosen, vilified by many in the peer-to-peer file sharing community, feels that the hardline tactics of the RIAA have been counter-productive. She feels the time is right for the RIAA to work with new technology in a more positive fashion.

So, the question deserves to be asked. Who gets the money collected from webcasters? If you guess that the beneficiaries are the artists themselves, you are grossly mistaken. Any money collected from royalty fees go directly to the RIAA and the record companies, further feeding the beast. Lobbying's hard work, after all.

Now, lest anyone get the wrong idea from this posting, nobody is demanding that the RIAA get stiffed on any money owed. Rather, it is a call for rational thought, in creating a system that is fair to all, including both webcasters and terrestrial broadcasters. And an effort to save a highly valuable medium that enables the population at large to become a larger presence in the media, something that is extremely important in this day and age. This new iron-fist tactic seems designed to enable an organization such as the RIAA, which represents the major recording conglomerates, to dictate who is allowed to deliver the content. And it is highly unfair. In short, the RIAA is shooting itself in the foot by bullying organizations that could help pad their bottom line in a considerable way.

And if the new royalty rates go into effect, the world of internet radio could resemble terrestrial radio. Only, instead of being dominated by the likes of Clear Channel, CBS, Entercom and Citadel, will be dominated by AOL, Apple, Microsoft, Yahoo and others, with the little guy once again squeezed out. Instead of breaking truly innovative artists who happen to be toiling away at major labels, webcasting fans will yet again have the not-so-talented likes of Jessica Simpson, Nickleback, the Pussycat Dolls and various other flavors of the week shoved down their throats. For this to happen to webcasting would be an absolute travesty. The recording industry has already helped to destroy terrestrial radio. Don't let them do it to internet radio, and don't let them try to single-handedly wipe out an entire class of small business.

You can find out more at Save Our Internet Radio, a new site started by Goldsmith, or Save The Streams, a similar site. For further reading, check out Gizmodo's Anti-RIAA Manifesto, the International Webcasting Association, and Kurt Hanson's excellent Radio And Internet Newsletter. There is also a petition that will be submitted to Congressional representatives, pleading to "please keep internet radio alive."

5 comments:

William said...

So, what can the public try to do to reverse the decision. I feel that we already have too much media consolidation in America, and that this move is a major mistake.

I am active on the Unfiltered News Network, where some of us put on internet radio shows as downloads. If this policy stands, I believe that a lot of internet programming will vanish.


Will in Chicago

ltr said...

You can check out Save Our Internet Radio. The link is in the last paragraph of this article. They have links to members of Congress and whoever else. Don't look for support from a few of them, especially in California, where Sens. Boxer and Feinstein are in the back pockets of the entertainment industry. When groups like the RIAA bark 'jump', they respond 'how high?'

As for talk radio, nothing to worry about here. The RIAA has no say over any webcaster not playing their product. Therefore, a webcaster such as Head-On Radio pays nothing in royalties. Life goes on as normal. This ruling would affect webcasters who rely on RIAA-represented music product.

Uncle Paul said...

Question: Can individual labels or artists "opt out" of royalties from internet radio by creating a public statement that says in effect: "All royalties due us from internet streaming of content we own will be donated in kind to the operation of the internet station." Wouldn't this cut off the RIAA at the knees and make way for new players in the music business while the big 5 dinosaurs continue to die off?

mopy said...

Correct me if I'm wrong...I'm a music webcaster btw...but even non-music or royalty-free music (i.e. local non-signed acts) would still have to pay $500/year to have their station right?

ltr said...

As far as I know, if it doesn't go through Sound Exchange, you don't owe them squat. And I believe there will be sort of provision that allows webcasters to negotiate royalties (if any) directly with the artists, therefore depriving John Simson of gas money for his Bentley.

A non-music station (i.e. talk radio) would have no reason to pay Sound Exchange royalties.

Just be careful about the local and unsigned acts. Sound Exchange is trying to collect for many indie labels. If the bands in question handle their own distribution (selling CD-Rs at gigs, out of trunks, etc.) you should be alright. People playing old public domain recordings should be okay too.

Lots of gray areas here. And if our elected officials had any kind of backbone (and are willing to resist the temptation of political contributions from the music cartel) they would accuse them of violating antitrust laws, which they obviously are. Unfortunately, there are way too many Barbara Boxers and James Sensenbrenners sucking at the RIAA teat.


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