Latest Salvos in the Ongoing Battle Of Webcasting

detroitindustrial writes "The Register reports on a backroom deal that screws small webcasters. The Voice of Webcasters, working with the RIAA, negotiated a deal that Congress is trying to make into a law. These rates give big discounts to the largest webcasters, while leaving around 96% of the smaller webcasters to suffer and die under the CARP rate. This is being done through the bill H.R. 5469, the Small Webcaster Amendment Act of 2002. It was originally a one paragraph bill to delay the CARP rates for 6 months, and was widely supported in its original form by the webcasting community. After the RIAA rewrote it, it turned into 30-page monstrosity that had no relation to the original bill. It has already passed in the House. Ann Gabriel, who was on the International Webcasting Associaion legislative committee, recently resigned in disgust over this sell out." It appears that the Register article misrepresents a few of the issues. Rusty Hodge, of SomaFM, has more on the actual effects of HR 5469... This is an email from Rusty Hodge, SomaFM's head honcho, which was sent to the Pho emailing list. Reprinted with permission:

Date: Mon, 14 Oct 2002 01:26:57 -0700
From: Rusty Hodge

The RIAA seems to have managed to really get a rift going in the
webcasting community.

I'll tell you all I know.

"Somebody shine a light of truth into the nature of these proceedings. You have many friends on pho list. Speak up. This is another dirty deal."
-- [ quote from The Register article ]

This article is based on a lot of incorrect information. What appears
to have happened was that someone on the carp@voiceofwebcasters.org
mailing list forwarded a bunch of messages from that list to the
author. (Nevermind that the mailing list messages have a disclaimer
which say that they are confidential and not for publication without
prior consent). I am annoyed that I was quoted out of context in the
article.

Tthe headline is based on one message that someone who opposed HR5469
posted, a message which is not accurate. The 96% number came from a
person who opposed all webcasting royalties and based his
calculations on the Shoutcast.com directory. It did not take into
account the broadcasters who operate via Live365 (which includes
thousands of broadcasters), the Windows Media radio directory,
Real.com, etc. It also assumed that all stations listed in the
Shoutcast.com directory are actually accessible. Because of the way
that the shoutcast automated directory works, even if you setup a
shoutcast server to privately distribute audio in your house or
within an office, by default it will appear in the shoutcast.com
directory. So will stations that do not have the network bandwidth to
reliably stream to a single listener. Anyone can run the Shoutcast
software on a DSL line, yet can't sustain a single listener because
of bandwidth limitations. And the statistic does not take into
account that many of those Shoutcast broadcasters are not based in
the US nor does this take into account where the listeners are.
(Remember, the DMCA/CARP fees only apply to listeners in the US.)

Now the current CARP rates - if you broadcast 12 songs an hour, and 7
average concurrent listeners, you'll be paying $516.50 a year. If you
only look at stations with more than 7 concurrent listeners on
average, or 5040 hours for the 30 day sample period, you get about
320 stations, and those stations represent 98% of the shoutcast
audience (based on listener numbers)!!! The remaining 2700 "stations"
are fighting for about 400 listener.

Of that 3000+ shoutcast stations listed who will be "screwed", more
than half of them do not have any listeners. If you have sampled
some of those near the bottom of the rating stations, you'll find
that many of them are either broadcasting silence, or their stream is
technically unlistenable (more dropouts than audio or you can't
connect to the stream at all).

(http://shoutcast.com/ttsl.html - has a rolling 30 day statistic
snapshot, which these numbers are based off)

HR5469 grants a lot more relief to a larger body of webcasters than
you'd think from reading that one mailing list. To the rest, HR5469
DOESN'T CHANGE ANYTHING. If it passes or fails, nothing changes for
the smallest webcasters.

(By the way, Live365 is neither harmed or hindered by this bill.
Their statement is here:

http://www.live365.com/carp/hr5469statement.html

Live365 is also represented ONLY by DiMA. Additionally, Live365 covers
the royalties for their member broadcasters, their member broadcasters
are not directly affected by this.)

Any webcaster with an average of more than about 25 concurrent
listeners is better off under this deal than the previous CARP
ruling. Beneath that limit, there is no difference.



There is another quote that is very misleading in the article:

``And privately, even members who support HR.5469 agree that it will
"seal the fate of this industry to be dominated by big webcasters,"
according to correspondence seen by The Register. ``

Actually, the quote "seal the fate of this industry to be dominated
by big webcasters" came from Kevin Shively (also fellow pho) of
Beethoven.com, on 9 Oct 2002. Kevin has stated many times that he
does not support the version of 5469 that was passed.

The Register should have attributed this quote because it completely
changes the meaning of it. Beethoven.com, a 14-employee company, is
owned by Marlin Broadcasting, a company that owns several FCC
licensed over the air stations. Kevin does not support HR5469 because
he believes that it sets the definition of small webcaster at too low
of a level. But I'll leave it to him to tell you what he thinks about
the bill. Kevin has been a driving force in lobbying for fairness for
small webcasters, and ironically, HR5469 would probably not have
passed without him, and it is very saddening that he will not benefit
from it. Kevin will hopefully post his concerns with the bill (I
recall it is Section 4 that he has problems with).

For the record, SomaFM feels that 5469 is far from a perfect bill.
However, we think it is a good starting point. Kevin has expressed
concerns in this bill setting precedents that will harm many
mid-sized webcasters. I believe that NAB is not supporting the bill
for the same reason.

``But the compromised Bill has some surprising backers. SomaFM and
KPIG are urging listeners to support the revised, RIAA-negotiated
venture.``

I was quoted somewhat out of context talking about advertising. I was
talking about a variety of options available for small webcasters,
one of which was advertising. However HR5469 extends the definition
of non-commercial webcasters to any non-profit organization, not just
FCC licensed non-commercial broadcast stations. That rate is less
than a third of the rate that commercial webcasters pay under the
current CARP fees ($0.0002 vs $0.0007). This I believe is a big win
for non-commercial internet only webcasters.

I was also pointing out that $500 a year minimum, vs the small
webcasters demand for $250 a year minimum, was negligible. I was also
pointing out that as they grew, and hit the $2000 minimum under the
new plan, that they would have an audience of over 25 average
concurrent listeners and at that point should have not trouble
obtaining advertising. They could bill up to $20k a year and have an
unlimited audience size.

SomaFM is listener supported and commercial free. We are not a
501(c)3 non-profit. Under the CARP rates, we would have to pay $500 a
DAY - over $180,000 a year in royalties. We generate about $20,000 a
year in donations now, which has covered about 85% of our costs
EXCLUDING the CARP FEES, and was on its way to covering all our
costs. (The cost that isn't covered is the cost of all the CDs I have
to buy!) SomaFM operates bare bones, our studios are in my garage.
We believe that we can generate enough additional donations to keep
us on the air with the rate proposed in HR5469. For us, it's
$2000-5000 a year instead of more than 10 times that under the old
CARP rates. So it's a no brainer for us to support this.


Another inaccurate quote:

"Many webcasters have already resigned in protest from the body
that's supposed to represent them: the Internet Webcasters'
Association. "

One person, Ann Gabriel, resigned. And Ann Gabriel was not a
webcaster, she produces live web events. She is not liable for past
CARP fees. In her open letter (which I've included below) she seems
to imply that IWA and VOW are the same.

Voice of Webcasters and the International Webcasting Association are
two separate entities.

The International Webcasting Association or IWA (which SomaFM is a
member), is not a lobby group on behalf of small webcasters. However,
since the IWA dues are far less than the other webcasting-related
trade group, DiMA, it has many more small webcasters than does DiMA.
As I recall, DiMA dues are $20k a year, IWA dues $300 a year. DiMA
represents bigger companies like Microsoft, AOL, Yahoo and smaller
guys like Live365. Jon Potter can tell you more about DiMA's goals.


Here's Ann's letter. I'm only forwarding it because it says it's an
open letter to the streaming community and the press, which i believe
describes many here on pho:

>Date: Wed, 09 Oct 2002 20:24:40 -0400
>From: Annmgabriel@aol.com
>Subject: [carplist] HR 5469
>
>Open Letter to the IWA Board of Directors, The IWA Legislative
>Committee, David Oxenford at Shaw-Pittman, CARP-List Members,
>Members at large of the Streaming Media Community and the Press:
>
>On October 1, 2002, at 12:00 pm Pacific Time, I began a 10-hour per
>day live broadcast with the intent to draw attention to the plight
>of Internet Radio broadcasters and raise money to benefit the IWA
>Legal Defense Fund.
>
>I did this based on the belief I was working to support HR 5469 as
>it was originally introduced into Congress; a bill calling for a
>stay in the rates imposed by the Librarian of Congress and due on
>October 20, 2002; and because I believed that Shaw-Pittman, the law
>firm involved in negotiating the deal with the RIAA was working on
>behalf of the International Webcasting Association (IWA).
>
>I am appalled, outraged and disgusted by the turn of events I have
>witnessed over the last week and will no longer sit and watch the
>blood, sweat and tears of the many be drown out by the disingenuous
>hue and cry of the few.
>
>I will NOT support HR 5469 as it was introduced and passed on the
>floor of Congress on October 6, 2002, nor will I encourage anyone
>who asks me to support it. I will immediately turn my attention to
>contacting every Senator I can, both by telephone and by fax, to let
>them know about the grave injustice that has been carried out in the
>name of the small webcasting community.
>
>Regardless of the stand the IWA takes on this issue, I, today,
>resign my membership in the IWA. I cannot stand by and continue to
>support an organization that allows its members to be bullied into
>accepting legislation that was negotiated one, under duress and two,
>by a team which originally set out to negotiate a private deal for
>themselves with the RIAA.
>
>I call on the members-at-large of the webcasting community to ask
>themselves why the press release about the deal on HR 5469 was done
>in the name of the RIAA and the Voice of Webcasters. I contend that
>the IWA was not represented here and its members are not responsible
>for the legal bills incurred by Shaw-Pittman. It is my belief that
>this was not a deal negotiated on behalf of the IWA or all of its
>members.
>
>I have been asked by many in the webcasting community how this could
>have happened. I think it is time for me to respond, and to let the
>webcasting community know all the facts about how HR 5469 could
>change from one paragraph as it was originally introduced, to a
>30-plus page bill serving only the RIAA and a few on the negotiating
>team.
>
>I believe I have an obligation to tell the truth NOW, as I know it,
>to the many who have banded together to fight for a common cause.
>They have seen their hopes go up in smoke because of a backroom deal
>negotiated under duress by a team that did not set out to represent
>webcasters at large and does not accept that the RIAA has a complete
>lack of respect for the webcasting community and never intended to
>deal fairly, honestly or forthrightly with the issues facing
>webcasters today.
>
>I wish you all the best of luck moving forward in a very difficult time.
>
>Sincerely,
>Ann Gabriel

SomaFM was not involved with negotiating this deal, although we did
sign a letter in support of it.

If you think my support is wrong, I'd like to hear the reasons why.

--Rusty Hodge
SomaFM.com

Comments

Good

[Theatetus]

Heh heh... I loved the gratuitous mention of the blind guitarist in the article

This is great. Really. It's an incentive for webcasters to look for sources of content not controlled by a media cartel. If you can't find decent bands who are willing to let you broadcast their music for free, you probably shouldn't be running an Internet radio station.

Justice

[Deton8]

Why should webcasters have to pay more per listener than a major FM radio station?

Re:Justice

[ottffssent]

Well, because they've got lower, I mean higher, I mean . . . Shit, it's the internet and everybody who knows nothing about it knows there's money in them thar' hills!

That's probably only funny because I didn't sleep last night. On the plus side, I'll bet the bill makes perfect sense now though!

Re:Justice

[broter]

...to imply that...webcasters should pay absolutly nothing is just wrong.

I think you've missed it. Just because the costs of web casting may be smaller does not imply that IP owners are entitled to more money. That runs counter to the philosophy of copyright in America (although IANAL). Royalties should not be robbery only limited by the broadcaster's pocket book.

Bait And Switch

[cybrpnk2]

Boy, I really feel shafted by all of this. I listen to several channels at Live365 and received a notice from them asking for emergency short-fuse support of the ORIGINAL HR 5469 which was supposed to go to a vote in only 72 hours or so. I went thru the email-my-congressmen-and-senators routine and felt smug that I had done my part to help. Now the original bill has been rewritten so that it's not the one I asked to be supported. This whole thing is so unfair when compared to the sweetheart deal the over-the-air broadcast radio stations operate under because they are effectively commercials to go buy a CD. So who is the Gang of Bigwigs that has circumvented this whole mess by arranging the rewrite? Despite my distaste for them, I've got to admit they sure know how to work the system...

Re:Bait And Switch

[jenkin sear]

I wouldn't worry too much- congressman (representatives and senators) routinely ignore email- most of it is astroturf. If you really want to influence a decision, call or write in the real world...

Tim

Re:Hackers are destroying the Internet

[Marijuana al-Shehi]

If it hadn't been for the greedy hackers "sharing" their music, the RIAA wouldn't have noticed the Internet at all.

That's not true. The industry saw dollar signs long before the average pimply faced teen knew what mp3 meant. Their business model--top-down music engineered by committees of accountants and marketroids--has failed because no one wants to hear music designed for the lowest common denominator. With the failure in their business model, a failing economy, unprecedented consolidation of media and politics, a gullible public, many easy scapegoats, they (and you) are perpetuating the fallacy that people who share music are to blame.

Nice troll (really--I'm a fan), but I think it's not subtle enough. Especially the "You people should be ashamed of yourselves.". ROTFFLMFAO!

Newsflash!

[wunderhorn1]

NEWSFLASH: Large webcaster supports bill that helps large webcasters, calls on small webcasters to cut their whining.

I mean, really, the difference between $250 and $500 is "negligible"? WTF? These people are hobbyists, they run these stations for friends and a sparse few random listeners. If paying an extra $250 is no big deal, then perhaps Mr. Hodge could send a check for that negligible amount my way; I'm a poor college student and could use the cash.

Rusty you talk a load of c***p

[NigelJohnstone]

I read Rusty's comment, but its playing with words. If the royalties have a minimum payment and a maximum payment then they favour the big guys over the little guys.
It does not matter how you count the number of radio stations, all that matters is there will be many more big guys than little guys in the years to come.

Next, this was a bait and switch move. Nothing you said changes that. They put one bill forward, got public approval for it, then switched it for another.
The fact you are among the ones who gained from the changes alters nothing.

What the RIAA did was split you guys in two, they pull a quick switch, and split the opposition in two. You turned your back on the little guys.

Also yet again the RIAA has shown that Congress is a little puppydog whose chain it can yank.

This is a nasty sellout.

20k a year in donations to cover WHAT expenses?

[cHiphead]

RANTRADIO.COM

I've been listening to rantradio for years and they sure as hell don't need "$20,000 a year" in donations to operate. Actually, they do it full time as a hobby and lose money anyway, but not tons of money. Cimmerian, the station manager, is perfectly capable of going out getting help and 'bandwidth donations' in a split second.

Hodges of SomaFM is full of shit. I liked SomaFM, I really did, but its blatantly obvious that the $$$ signs are all Hodges is seeing now.

Naive Approach

[Kefaa]

For the record, SomaFM feels that 5469 is far from a perfect bill. However, we think it is a good starting point.

A "good starting point" are words we would probably hear describe the DMCA at its inception. However, instead of moving back to a more reasoned approach, it continues toward even more draconian measures such as Fritz's most recent incantation of what Fair Use and infringement mean. Of the now infamous, "skipping commercials is a contract violation" speach.

I believe Rusty is sincere in his belief that this is a good start. However, I also believe it naive to think the tail will ever wag the dog. However, when the RIAA sent in a team of people to "re-write" this bill, looking out for "others" best interests is not why they are there. Further, to think that the bill will at any time in our life time be "revisited", except to make the restrictions greater and the fees higher, is unrealistic.

As the saying goes "Fool me once, shame on you. Fool me twice, shame on me."

Re:Hackers are destroying the Internet

[Anonymous Coward]

Why is this modded "insightful"? It should be "troll".

Hackers BUILT the Internet, you moron.

Re:Suppor the Bill!

[RebelTycoon]

Ya... but it went from 1 to 30 pages once the RIAA got involved. I am happy di.fm is supporting and going to continue online, but I want to know what else in the 29 other pages got inserted and just hasn't been found yet.

Expect in the future for the definition of SMALL to become larger and larger until that saying of "first they came for the stations with only 5 users, but since I had 5,000, I wasn't worried. ... Eventually they came for the 5,000... Who will defend me." I don't like definitions and groupings to be stated since those WILL BE CHANGED and the BOUNDARIES broadened to maximize the RIAA revenue in the future.

Basically they are grabbing what they can now, and knowing that in the future they will go for more, probably before anyone can organize in time.

Remember, this is the RIAA, unlike the MPAA that does enable LoTR and ST and SW, I have little to be thankful of the RIAA for.

So RIAA, get bent!

Why not avoid RIAA altogether?

[teamhasnoi]

Only play non-RIAA music! There are a million and one unsigned geniuses out there.

Granted, it would take more work to insure a semblace of quality, but artists can record in their basements what would have taken a mid-level studio five years ago. The RIAA can't touch what it doesn't have control over.

Leave the biglabel stuff alone. Christ, it gets enough airplay as it is. We certainly do not need another nuMetal station - The greatest hits of one band with different names!

There is plenty of music that has nothing to do with the RIAA, would bend over backwards to be on a station (probably would record a web only version just for you).

If you don't believe me, spend some time in Minneapolis, MN. The land of ten thousand lakes, and twenty thousand bands.

Tragedy of the Commons

[Vengie]

Actually, the Classic case of the Tragedy of the Commons follows:

I am a cow or sheep farmer.
I may use the commons to graze my animal.
The commons may only support N animals.
There are P farmers.
Therefore, I may safely graze N/P animals without damaging the commons, like all other farmers.
There is NO incentive for me to not damage the commons, since I can profit extra by adding an extra cow.
Rinse, Lather, Repeat for each individual farmer.
This easily, _without_ a second iteration, produces NP+P cows, NP+P > NP, so the commons goes to ruin.

Having said this, can someone please show me how in the hell _not having obscene webcasting rates_ is a tragedy of the commons?
Webcasting may or may not have an economic impact on artists (*cough record companies cough*) and I make NO STATEMENT regarding that as I have absolutely no statistics and am completely unqualified to do so -- HOWEVER -- I am intelligent, rational, and quite capable of pointing out that the situation does NOT closely resemble the Tragedy of the Commons. (Music is a non-depletable good. Unlike an apple or a blade of grass -- comestibles and other consumables -- if one person listens to music, it can be listened to by another. The tragedy of the commons only applies to PUBLIC ACCESS goods which are CONSUMABLE)
-nuff said

So.... what do the two bills actually say?

[namespan]

So... what did the old bill actually say?

What does the new one actually say?

I really can't tell from the articles or the comments... can someone give a simple explanation of the fee structures?

Re:Suppor the Bill!

[Anonymous Coward]

I went to my favorite Webcater (Live365) to see what they had to say.


Live365 remains frustrated with the process of obtaining a fair royalty rate. HR 5469 fails to provide long-term relief to any webcasters, as even the smaller webcasters will still be saddled with the old rates if they become bigger. We do not believe that any webcasters would have agreed to the terms of HR 5469, without the threat of bankruptcy looming over them.


It looks like someone carved out a sweetheart deal for themselves and screwed over everyone else.

Re:Driven underground, but not dead.

[goon america]

... or they could just broadcast from outside the US. The beauty of the internet, you can have intercontinental radio, and no way to stop it unless you want a nationwide packet filter.

Has anyone READ the bill?

[dschuetz]

It was originally a one paragraph bill to delay the CARP rates for 6 months, and was widely supported in its original form by the webcasting community. After the RIAA rewrote it, it turned into 30-page monstrosity that had no relation to the original bill. It has already passed in the House.

Okay, lessee... thomas.loc.gov... H-5469.. Two versions... first version -- huh. doesn't do anything, just delays stuff. (The entire text of first version: The determination by the Librarian of Congress of July 8, 2002, of rates and terms for the digital performance of sound recordings and ephemeral recordings, pursuant to section 112 and section 114 of title 17, United States Code, shall not apply during the 6-month period beginning on October 20, 2002.)

New version... modifies USC 17-112(e).. Hm... Findlaw.com... er, hm. Inserts sentence--Hey! Does anyone have a version of patch (1) that works on the US Code? ... Okay, it's complicated, and confusing. But it seems to me that the simple "1-paragraph bill" did absoultely nothing except delay everything for 6 months (as mentioned in the article above but glossed over by many posters), and the "30-page RIAA-sponsored monstrosity" actually attemts to present a solution.

I'm sure other people have done a much better job of summarizing the bill's actuall effect, but it looks to me that, for small webcasters, it:

• Sets retroactive rates (1998-2002) at 8% of revenue or 5% of expenses, whichever is greater
  
• Sets 2003/2004 royalty rates to 10% of 1st $250,000 in revenue, and 12% of revenue above that
  
• Allows for three equal payments over 12 months for back royalties
  
• Sets minimum back-royalty payments for 1998-2002 of $500 to $2000 (or up to $5000 if you make a lot of money)
  
• Allows for election of alternate (.02 cents per performance) royalty structure
  

Now, I'm not a webcaster, so these numbers don't mean too much to me. It looks like a "small webcaster" is someone who didn't make more than $1,000,000 from 1998-2002, who isn't expected to make more than $500,000 in 2003, and isn't expected to make more than $1.25 million in 2004. That's pretty big, for a "small" webcaster.

So what I don't understand is this:

• DMCA is passed. Provision is made for LoC to set royalty rates.
  
• Library of Congress sets said rates.
  
• Everybody hates those rates.
  
• Bill is introduced that doesn't fix rates, but simply delays them for six months, giving people half a year to figure out how to shut down without going into bankruptcy court
  
• New bill is introduced that actually addresses the rate issue in reasonable fashion
  
• Webcasters support new bill
  
• Register article comes out saying that new bill screws people over, give us back the old bill (which, remember, didn't do anything
  
• Slashdot picks up Register article (imagine that!) and 90% of posters agree with Register's FUD
  

I just don't get it.

Re:Hackers are destroying the Internet

[orangesquid]

Don't forget EBCDIC, on all those /beautiful/ IBM!'s (International Brontosaurus Machines)