Xm and Sirius should have taken the cable-TV model approach. One company should have built the infrastructure, and other companies should have provided the programming. Then when programming deals went wrong (i.e. paying fortunes for name brand broadcast personalities, which proved to be not worth it in most cases) the infrastructure company would be in fine shape; only the programming supplier's business would be in trouble.
It's also sad to see how XM and Sirius duplicated so much programming across the two. They've changed that now with the coordinated lineup, but in the process it seems we got the intersection of their channels, not the union of them... they're down to 65 music channels now; hard to see how that's enough to properly cover all the formats they're trying to cover.
Iridium phones didn't go away. In fact, they're now used more than ever. Same thing will happen to XM/Sirius. They'll go bankrupt, the service will change a bit, but ultimately they'll have more subscribers than ever.
Their biggest mistake was not offering a small set of advertising-supported free channels, that didn't require a subscription... or a minimal $20 for 2 years subscription. Basic cable, as it were.
I"m sorry, but this is a puff piece about Limelight and nothing more. Limelight and Akamai are both "edge servers", Akamai has been putting cache boxes into ISPs for a long time. So Limelight put stream proxies into DSL providers head ends, it's not brain surgery; it's just making a business deal.
The FM radio lobby is extremely powerful and they conspired to use the royalty fees to drive the internet radio out of the market.
That's not correct. The terrestrial broadcasters (AM/FM) had nothing to do with this royalty- because it affects their streaming as well. And I don't know if you have noticed, but CBS and Clear Channel are the overall biggest sttreamers out there according to Webcast Metrics. They oppose these royalties as well.
And don't forget that the RIAA how has a bill introduced to put a royalty on their over the air broadcasts.
The royalties are all driven by the big RIAA labels who more than anything want control over what is broadcast. By setting royalties high, they make it so that webcasters have to make direct deals with them, and part of those deals is featuring the content the big labels want featured. It's like Payola the labels don't have to pay for. So you can see what the big draw of these royalties are.
It is not practical to administer legal agreements with every artists you would play over the radio station. That's why the "statutory license" concept exists. Broadcasters WANT the license. We are just not happy with the price that has been mandated for that license.
We play music from at least 400 different labels. And 10,000+ artists. We'd have to have a full-time legal department to track all those contracts.
But it is still true that SX is the mandatory collector. As a rightsholder (e.g. label or artists that owns their own copyrights), you can license outside of SX, but anyone else can still play your music as long as they're paying SX.
If a rightsholder opts-out of SX, they're just giving SX their royalty money. As an artist, there is no reason NOT to collect any money you're due from SX.
Once Deezer gets some traction in the US, SoundExchange and the RIAA will go after them- it currently doesn't matter where you're broadcasting from, it matters where you're broadcasting TO. That's why Pandora stopped streaming to the EU. Deezer will have to do the same to the US once they get on SoundExchange's radar.
Shutting them down is a harder thing to do, but they're still liable for royalties here in the US.
The bottom line is that the Royalty situation in the US is stupid and totally holding back online music. There are rules in the DMCA that say you can't play a song on-demand (unless you have negotiated direct licenses with the record labels). Pandora has to put all these legal workarounds into their system. That's why you can't skip more than a certain number of songs, and why you can't hear a particular song when you want to. It's not that Pandora's system sucks, it's that they're working around these rules that suck.
The old small webcaster agreement was 7% of a webcasters expenses or 10-12% of the gross revenues, whichever was higher.
The RIAA explicitly doesn't want radio services operating at a loss or with no revenue and then "giving their music away". They don't want to see broadcasters "give away music". They want to see broadcasters make lots of revenue that they can get a part of.
They're particularly annoyed that Last.FM was sold for $200+ million, which they use as their example of a company that had years of no revenue while they built their audience share, only to then make a ton of money when they sold out. (It's a lame argument, but it's one they consistently make to congress whenever they can.)
Satellite radio pays about 6-7% of their gross revenues to SoundExchange as their royalty rate. It's a bit more complex than that, because they have lots of "exceptions" to the gross revenue that the royalties are not calculated on (e.g. licensing fees from hardware manufacturers) but it comes down to about 6% of their gross revenues. The "hourly" numbers mentioned in that article are extrapolated based on Arbitrons sat radio ratings which show hourly usage details on sat radio: because obviously most subscribers don't listen to sat radio 24x7.
Smaller internet radio operators (and many of the larger ones that only do radio) are pushing for a percentage of revenue option as well. In the past, small webcasters with less than 1.25 mil in revenue were allowed to pay a sliding scale of 10-12% of their gross revenues. SoundExchange offered to extend that offer to small webcasters but only those who stream to less than an average of about 6800 simultaneous listeners (which translates to 5 million total listener hours a month). This disqualifies a lot of small internet broadcasters like DI.FM, Club977, AccuRadio and SomaFM, who would be considered "large broadcasters" under this proposed settlement.
The Internet Radio Equality Act looks to set the rate at 7.5% which is still higher than what other countries pay, but will not put US webcasters out of business.
``1 dinosaur radio station has way more listeners than all your internet radio stations all rolled together have.``
That's not correct. There are many internet stations that have more listeners than a single AM/FM station. The numbers you want to compare is a AM or FM's AQH persons to a net stations average concurrent listeners. Not AQH share (which is the percentage of all people currently listening to radio listening to a particular station). For example, WBUR Boston, one of the higher rated stations in Boston, is about 40,000 listeners during drive time. Now for comparison, at this time of night (midnight PST), the combined listeners to the top 20 on Shoutcast.com is over 40,000. That's just the top 20.
A large interent station (say, one of the most popular DI.FM streams, or Club 977 for example) can have more listeners than a top 5 station in a medium size market like Jacksonville, FL.
And that's not even counting music services like AOL, Last.FM and Pandora.
Radio does work well for some segments of the community. But it's a dying breed, largely due to lack of compelling programming. And if you have internet in your car, listening to net radio you can get your traffic and weather online as well. You don't need to wait for it to come on. Heck, your traffic will be integrated with your GPS. Why do you need to listen to someone read a 5 minute out of date traffic report to you when you can have an instant online version?
I had a long discussion at a party with Dave Heckman of Metropolis records last summer, when the issue was the net radio royalties. He's a big supporter of those royalties, he likes the checks he gets from SoundExchange each month.
This isn't purely a RIAA issue; there are a lot of other independent labels who also want to get these royalties. It's a much more complex issue than is being let on here, a large part of the reason US rightsholders (in most cases, the labels) want the sound recording performance right is so that US artists can start getting their cut of the royalties that are paid in the rest of the world. When a US recording gets played in the EU, for instance, the broadcaster over there is paying. But the royalty doesn't get distributed to the US artists because the US doesn't collect and distribute to Euro rightsholders.
In fact, A2IM, the American Association of Independent Music supports a sound recording performance right. Most of their members support this as well.
(Disclaimer, SomaFM is an associate member of A2IM)
If done fairly, this royalty is fine. The composers of songs are already getting paid; why shouldn't the person who owns the copyright of the sound recording?
The problem is that for webcasters, these rates were set insanely high; and based on metrics that don't make sense (per song, per listeners) and metrics that couldn't even be accurately tracked for over-the-air radio. (One can argue they can't be accurately tracked for net radio either- you don't know how many people are listening to one stream; or if the volume is muted but the stream is playing, etc).
The rate will probably end up at about 3% of revenues. There will be good exemptions for non-commercial broadcasters and small community stations. But these are the pieces that have to be negotiated. That's where people who hold a stake in the outcome of all this need to be talking and negotiating now.
I hate having to be the one to defend SoundExchange, but SoundExchange is authorized by US Copyright law to collect royalties under section 114 of the copyright act. They're not just asserting this claim out of nowhere. They are also no longer a division of the RIAA and half their board of directors are independent label and artist reps. SoundExchange is only 50% a tool of the RIAA.
The solution to this is simple: amend copyright law to extend the broadcast exemption to internet radio. This can be done by amending 114(j)(3) of the Copyright Act to change the definition of "broadcast transmission" to include internet radio broadcasts, aka eligible nonsubscription transmission, as defined in Sec. 114(j)(6).
Over-the-air broadcasters are exempt from paying royalties on the sound recording copyright. These royalties were legislated by the Digital Performance Right in Sound Recordings Act of 1995 (aka the DPRA). The reason was that it was then thought "digital" broadcasts were "perfect copies" of an original work and should therefore be treated different from over-the-air radio broadcasts; hence the law was changed so that only over-the-air broadcasters were exempted from royalties on the performance of sound recordings. When the original copyright laws were written, Congress realized it was creating a legal monopoly to the copyright holder. So in order to balance out that government-given monopoly it also added provisions for fair use, such as copying for personal use, exemptions for libraries, and exemptions for radio broadcasters.
The DPRA is based on a fundamentally flawed assumption -- that "digital transmission" allows unlimited perfect digital copies of the original work. But internet radio stations do not distribute perfect digital copies of the original copyrighted performance; instead, they use MP3 and WMA. Such broadcasts are drastically "compressed" and (I'm sure you know) nowhere near a perfect digital copy. They also segue songs together, and make announcements over the beginnings and ends of songs. It's just like over-the-air radio, and in many cases, the audio quality of the internet broadcast is inferior to an analog FM broadcast!
The current compulsory license is not a blanket fee. It's a charge per track per listener. If I play 10 tracks an hour that I've negotiated licenses for, and 2 tracks that I haven't, I only need to pay the compulsory license fee for those two tracks (times the number of people listening to that track).
You can still use the compulsory license for copyright holders that do not want direct negotiations. I actually think that this is what the big net radio services (like Yahoo and AOL) do: they direct negotiate for low rates from copyright holders, and those that they can't come to agreement with are the ones they license under the compulsory license. No need to choose one way over the other.
``And please don't simply cite RIAA's own page of "distributed labels of reporting companies" or the Wikipedia equivalent, because neither of those lists are verifiable of actual paying members``
Yes, as we all know the RIAA falsely claims hundreds of members who are not members.
You are confusing the term "independent label" with the term "non-RIAA member label". An independent label is one that is not owned by one of the Big 4 labels.
I'm no fan of the RIAA, but let's get the facts correct.
Most indie artists are registered with ASCAP, BMI or SESAC. (Most major label artists as well.) Actually, it's the people who write the songs that register with them, as ASCAP and BMI license the underlying composition of a song, not the recording of that song.
The RIAA is involved with the "sound recording" copyright. This is administered through SoundExchange, which began as an independent division of the RIAA but is now a separate company with its board of directors made up of half RIAA types, and half people representing the artists. Under current US copyright law, over the air broadcasters are exempt from paying any royalties to SoundExchange.
The RIAA has nothing to do with ASCAP and BMI. Don't confuse SoundExchange and ASCAP/BMI/SESAC.
While some indie artists want their music played for free, others don't. I was just talking to one at Brunch today, and he was complaining that his royalties from BMI keep going down from year to year. He's annoyed that his music is being played without any compensation to him. Why shouldn't he be annoyed? He doesn't get his apartment for free, or his music gear for free.
Hobby artists are no the same as indie artists. Professional indie artists need to make money from their works. They do that from getting paid royalties when songs they compose are broadcast.
ASCAP/BMI/SESAC royalties are quite reasonable. The current royalty decision (which was driven by RIAA member companies) in many cases is 80-100 times what an internet radio station pays to ASCAP/BMI/SESAC.
There are over 1000 labels that are members of the RIAA. Closer to 1400. Most RIAA-haters think their favorite music isn't released by RIAA member labels. You'd be surprised at how much "indie" music is.
Actually, terrestrial radio is not charged at all for these royalties. It's a royalty only on internet radio services. That's what is so unfair.
Terrestrial radio pays ASCAP/BMI/SESAC based mostly on their revenues though, not audience size. As there is no way to completely accurately measure audience of over the air stations.
From what I've seen in published ratings, Club977 gets well more than twice the number of listeners that SomaFM gets, so based on what we'd have to pay JUST FOR 2006, Club977 would have to pay over $1.5 million dollars just in royalties.
Bob Bellin from mp3player.com posted this to the Pho mailing list, which really nicely sums it up:
(AQH is the average concurrent listeners to a stream)
Here is equation as it really exists: The numbers not only preclude small webcasters from existing, they make it impossible for large ones to exist as anything but a loss leader for a bigger concern. If a webcaster with an AQH of roughly 10,000 will have to pay $2 million just for rights in 2010, that means that one with an AQH of 100,000 (large by current standards but at may well be medium by 2010) will have to fork over $20 million. In practical terms, after paying these fees there is no possible way to break even in webcasting, much less make a profit.
But don't take my word for it...look at the numbers. The current cost per thousand for national radio (the closest cousin to webcasting) is about $2. That means, the marketplace would price an ad on that station at $20. When I managed radio stations, we would assume that a healthy radio station would sell about 45,000 commercial units/year. Let's look at a best case scenario. A webcaster (AQH of 10,000) sells 45,000 units - and my guess is the best of them hasn't sold 20% of that number. And let's assume that because webcasting listeners are very attractive (for a lot of reasons - income, inclination to shop online and others) that this hypothetical radio station can get $4 per thousand (or $40/spot) for their ads. The odds of any webcaster meeting this threshold on units sold or CPM (much less both) are astronomically low, yet under these circumstances this webcaster would bill $1.8 million and would owe over $2 million in royalty fees to SoundExchange in 2010. And this equation applies to bigger webcasters as well. The bigger webcaster (100,000 AQH) would owe over $20 million in royalties but could never generate that much revenue. Jim's suggestion that only smaller webcasters will be hurt doesn't hold up under the current metric as there is no economy of scale possible under this system.
So where is the marketplace? Where is the business model? Do you (or anyone else) know of a private equity concern or angel that wants to sign on to these projections and invest in webcasting?
Note that a load of 45,000 commercial units/year is about 5 commercials an hour, much more than what many net stations are playing now.
There is no way that anyone, big or small, could make this work without making deals directly with all the copyright holders. I suspect that the big companies like Yahoo and AOL already have agreements in place with all the major labels. Because of this, they'd only be paying royalties under this statutory license for music with rights not owned by someone they have a deal with. Smaller stations without the clout to make a deal with rights holders would be screwed.
Best case scenario: prepare for lots and lots more commercials!
It will only kill those who try to stay legal. Back in 2002, many webcasters got together, hired a lobbyist, and got the Small Webcasters Amendment passed, which allowed small broadcasters operate on a percentage of revenue model (11% aprox). The new rates start out at effectively 10-40 times what the old rates were, and by 2010 increase by 2.5x. So by 2010, legal net broadcasters will be paying 25-100 times what they paid in the 2000-2005 periods.
Of course, you can just say, screw it, and not pay, and hope you're not noticed. It's actually worked very well for lots of stations out there.
Net radio didn't cry wolf, it sounded the alarm. And only through the listeners and supporters who wrote and called their congress people was the small webcasters act passed.
We are going to have to act again to preserve the state of internet radio as it is. Only this time we should get right to the cause, and act to get the provisions of the DRPA and DMCA that removed the fair use exemptions that over-the-air broadcast radio has from these royalty requirements.
The difference is that over the air traditional radio doesn't have to pay these fees at all. They are granted an exemption under federal copyright law. Only digital/internet radio stations have to pay this fee, as set forth by the DRPA and DMCA. Not fair that mega corps like Clear Channel and CBS don't have to pay these fees for their over the air broadcasts which reach way more listeners, and only internet radio stations do, is it?
Novus ordo said ``You can go to each band whose music you want to play and make a deal with them directly.`` That's only true if the band owns their own copyrights. If the band has been released on CD / (or through online distribution like iTunes), most likely the band has licensed the rights to their track to a label or distributor. That is who you need permission from, not from the artist.
So unless you're talking about bands that are unsigned, or bands that own their own labels, the band/artist is not in a position to license their music for internet radio broadcast!
This is the big misnomer: It's not RIAA music. It's any copyrighted music that a station hasn't been granted explicit permission to play.
In many cases, the artist doesn't own the copyrights, the record label (small, medium or large!) has been assigned the copyrights as part of the record deal made with the artist.
Internet station can survive if they go out and get permission from the copyright holders for every track they play. This is tedious and time consuming, but still economically better than paying under the statutory license.
The comments in the Congressional Record do not make this as bad as it first appears:
The main idea is that ``a company may not provide a recording device to a customer that would allow him or her to create their own personalized music library that can be manipulated and maintained without paying a reproduction royalty.`` This would be if an internet radio station distributed stream ripping software that split tracks and labelled them accordingly.
``This does not mean such devices cannot be made or distributed. It simply means that the business must negotiate the payment for the music outside of the statutory license.`` That would also mean that radio stations that have negotiated deals directly with their artists/rightsholders would be able to do this.
``In addition, if the device allows the consumer to manipulate music by program, channel, or time period that would still be permitted under the statutory license.`` So it's explicitly targeting streamripping that uses the meta data transmitted to split the tracks apart. Not to simple recording a broadcast, as pointed out in the next sentence:
``For example, if a listener chooses to automatically record a news station every morning at 9:00 a.m.; a jazz station every afternoon at 2:00 p.m., a blues station every Friday at 3:00 p.m., and a talk radio show every Saturday at 4:00 p.m., that would be allowable. In addition, that listener could then use their recording device to move these programs so that each program of the same genre would be back to back.``
``What a listener cannot do is set a recording device to find all the Frank Sinatra songs being played on the radio-service and only record those songs. By making these distinctions this bill supports new business models and technologies without harming the songwriters and performers in the process.``. This is largely targeted at Sirius and XM who are selling devices that scan their channels and pick out the tracks that a customer wants to listen to automatically. Basically, a programmable stream ripper in the satellite radio receiver. Devices like the Sirius S50, which are being promoted as an iPod replacement that's automatically loaded with new music from Satellite.
Here is the irony for internet broadcasters:
Stream ripping is possible because the RIAA demanded that net broadcasters send the information on what track and artist is playing, and this got put into the DMCA. This is what led to stream ripping.
Internet radio broadcasters could simply turn off meta-data and prevent track-splitting type stream ripping. Simple solution.
So the issue is that we need to separate DRM from stream-ripping. We don't have to add DRM to stop stream ripping... and DRM would likely stop all stream recording as well.
This is the issue that needs to be presented to congress. DRM is not the solution to the problem they are trying to solve. Of course, the RIAA would love to trick legislators into mandating DRM, because the RIAA doesn't want you to be able to record ANYTHING.
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Xm and Sirius should have taken the cable-TV model approach. One company should have built the infrastructure, and other companies should have provided the programming. Then when programming deals went wrong (i.e. paying fortunes for name brand broadcast personalities, which proved to be not worth it in most cases) the infrastructure company would be in fine shape; only the programming supplier's business would be in trouble.
It's also sad to see how XM and Sirius duplicated so much programming across the two. They've changed that now with the coordinated lineup, but in the process it seems we got the intersection of their channels, not the union of them... they're down to 65 music channels now; hard to see how that's enough to properly cover all the formats they're trying to cover.
Iridium phones didn't go away. In fact, they're now used more than ever. Same thing will happen to XM/Sirius. They'll go bankrupt, the service will change a bit, but ultimately they'll have more subscribers than ever.
Their biggest mistake was not offering a small set of advertising-supported free channels, that didn't require a subscription... or a minimal $20 for 2 years subscription. Basic cable, as it were.
I"m sorry, but this is a puff piece about Limelight and nothing more. Limelight and Akamai are both "edge servers", Akamai has been putting cache boxes into ISPs for a long time. So Limelight put stream proxies into DSL providers head ends, it's not brain surgery; it's just making a business deal.
The FM radio lobby is extremely powerful and they conspired to use the royalty fees to drive the internet radio out of the market.
That's not correct. The terrestrial broadcasters (AM/FM) had nothing to do with this royalty- because it affects their streaming as well. And I don't know if you have noticed, but CBS and Clear Channel are the overall biggest sttreamers out there according to Webcast Metrics. They oppose these royalties as well.
And don't forget that the RIAA how has a bill introduced to put a royalty on their over the air broadcasts.
The royalties are all driven by the big RIAA labels who more than anything want control over what is broadcast. By setting royalties high, they make it so that webcasters have to make direct deals with them, and part of those deals is featuring the content the big labels want featured. It's like Payola the labels don't have to pay for. So you can see what the big draw of these royalties are.
It is not practical to administer legal agreements with every artists you would play over the radio station. That's why the "statutory license" concept exists. Broadcasters WANT the license. We are just not happy with the price that has been mandated for that license.
We play music from at least 400 different labels. And 10,000+ artists. We'd have to have a full-time legal department to track all those contracts.
But it is still true that SX is the mandatory collector. As a rightsholder (e.g. label or artists that owns their own copyrights), you can license outside of SX, but anyone else can still play your music as long as they're paying SX.
If a rightsholder opts-out of SX, they're just giving SX their royalty money. As an artist, there is no reason NOT to collect any money you're due from SX.
Once Deezer gets some traction in the US, SoundExchange and the RIAA will go after them- it currently doesn't matter where you're broadcasting from, it matters where you're broadcasting TO. That's why Pandora stopped streaming to the EU. Deezer will have to do the same to the US once they get on SoundExchange's radar.
Shutting them down is a harder thing to do, but they're still liable for royalties here in the US.
The bottom line is that the Royalty situation in the US is stupid and totally holding back online music. There are rules in the DMCA that say you can't play a song on-demand (unless you have negotiated direct licenses with the record labels). Pandora has to put all these legal workarounds into their system. That's why you can't skip more than a certain number of songs, and why you can't hear a particular song when you want to. It's not that Pandora's system sucks, it's that they're working around these rules that suck.
The old small webcaster agreement was 7% of a webcasters expenses or 10-12% of the gross revenues, whichever was higher.
The RIAA explicitly doesn't want radio services operating at a loss or with no revenue and then "giving their music away". They don't want to see broadcasters "give away music". They want to see broadcasters make lots of revenue that they can get a part of.
They're particularly annoyed that Last.FM was sold for $200+ million, which they use as their example of a company that had years of no revenue while they built their audience share, only to then make a ton of money when they sold out. (It's a lame argument, but it's one they consistently make to congress whenever they can.)
Satellite radio pays about 6-7% of their gross revenues to SoundExchange as their royalty rate. It's a bit more complex than that, because they have lots of "exceptions" to the gross revenue that the royalties are not calculated on (e.g. licensing fees from hardware manufacturers) but it comes down to about 6% of their gross revenues. The "hourly" numbers mentioned in that article are extrapolated based on Arbitrons sat radio ratings which show hourly usage details on sat radio: because obviously most subscribers don't listen to sat radio 24x7.
Smaller internet radio operators (and many of the larger ones that only do radio) are pushing for a percentage of revenue option as well. In the past, small webcasters with less than 1.25 mil in revenue were allowed to pay a sliding scale of 10-12% of their gross revenues. SoundExchange offered to extend that offer to small webcasters but only those who stream to less than an average of about 6800 simultaneous listeners (which translates to 5 million total listener hours a month). This disqualifies a lot of small internet broadcasters like DI.FM, Club977, AccuRadio and SomaFM, who would be considered "large broadcasters" under this proposed settlement.
The Internet Radio Equality Act looks to set the rate at 7.5% which is still higher than what other countries pay, but will not put US webcasters out of business.
``1 dinosaur radio station has way more listeners than all your internet radio stations all rolled together have.``
That's not correct. There are many internet stations that have more listeners than a single AM/FM station. The numbers you want to compare is a AM or FM's AQH persons to a net stations average concurrent listeners. Not AQH share (which is the percentage of all people currently listening to radio listening to a particular station). For example, WBUR Boston, one of the higher rated stations in Boston, is about 40,000 listeners during drive time. Now for comparison, at this time of night (midnight PST), the combined listeners to the top 20 on Shoutcast.com is over 40,000. That's just the top 20.
A large interent station (say, one of the most popular DI.FM streams, or Club 977 for example) can have more listeners than a top 5 station in a medium size market like Jacksonville, FL.
And that's not even counting music services like AOL, Last.FM and Pandora.
Radio does work well for some segments of the community. But it's a dying breed, largely due to lack of compelling programming. And if you have internet in your car, listening to net radio you can get your traffic and weather online as well. You don't need to wait for it to come on. Heck, your traffic will be integrated with your GPS. Why do you need to listen to someone read a 5 minute out of date traffic report to you when you can have an instant online version?
I had a long discussion at a party with Dave Heckman of Metropolis records last summer, when the issue was the net radio royalties. He's a big supporter of those royalties, he likes the checks he gets from SoundExchange each month.
This isn't purely a RIAA issue; there are a lot of other independent labels who also want to get these royalties. It's a much more complex issue than is being let on here, a large part of the reason US rightsholders (in most cases, the labels) want the sound recording performance right is so that US artists can start getting their cut of the royalties that are paid in the rest of the world. When a US recording gets played in the EU, for instance, the broadcaster over there is paying. But the royalty doesn't get distributed to the US artists because the US doesn't collect and distribute to Euro rightsholders.
In fact, A2IM, the American Association of Independent Music supports a sound recording performance right. Most of their members support this as well.
(Disclaimer, SomaFM is an associate member of A2IM)
If done fairly, this royalty is fine. The composers of songs are already getting paid; why shouldn't the person who owns the copyright of the sound recording?
The problem is that for webcasters, these rates were set insanely high; and based on metrics that don't make sense (per song, per listeners) and metrics that couldn't even be accurately tracked for over-the-air radio. (One can argue they can't be accurately tracked for net radio either- you don't know how many people are listening to one stream; or if the volume is muted but the stream is playing, etc).
The rate will probably end up at about 3% of revenues. There will be good exemptions for non-commercial broadcasters and small community stations. But these are the pieces that have to be negotiated. That's where people who hold a stake in the outcome of all this need to be talking and negotiating now.
I hate having to be the one to defend SoundExchange, but SoundExchange is authorized by US Copyright law to collect royalties under section 114 of the copyright act. They're not just asserting this claim out of nowhere. They are also no longer a division of the RIAA and half their board of directors are independent label and artist reps. SoundExchange is only 50% a tool of the RIAA.
The solution to this is simple: amend copyright law to extend the broadcast exemption to internet radio. This can be done by amending 114(j)(3) of the Copyright Act to change the definition of "broadcast transmission" to include internet radio broadcasts, aka eligible nonsubscription transmission, as defined in Sec. 114(j)(6).
Over-the-air broadcasters are exempt from paying royalties on the sound recording copyright. These royalties were legislated by the Digital Performance Right in Sound Recordings Act of 1995 (aka the DPRA). The reason was that it was then thought "digital" broadcasts were "perfect copies" of an original work and should therefore be treated different from over-the-air radio broadcasts; hence the law was changed so that only over-the-air broadcasters were exempted from royalties on the performance of sound recordings. When the original copyright laws were written, Congress realized it was creating a legal monopoly to the copyright holder. So in order to balance out that government-given monopoly it also added provisions for fair use, such as copying for personal use, exemptions for libraries, and exemptions for radio broadcasters.
The DPRA is based on a fundamentally flawed assumption -- that "digital transmission" allows unlimited perfect digital copies of the original work. But internet radio stations do not distribute perfect digital copies of the original copyrighted performance; instead, they use MP3 and WMA. Such broadcasts are drastically "compressed" and (I'm sure you know) nowhere near a perfect digital copy. They also segue songs together, and make announcements over the beginnings and ends of songs. It's just like over-the-air radio, and in many cases, the audio quality of the internet broadcast is inferior to an analog FM broadcast!
The current compulsory license is not a blanket fee. It's a charge per track per listener. If I play 10 tracks an hour that I've negotiated licenses for, and 2 tracks that I haven't, I only need to pay the compulsory license fee for those two tracks (times the number of people listening to that track).
You can still use the compulsory license for copyright holders that do not want direct negotiations. I actually think that this is what the big net radio services (like Yahoo and AOL) do: they direct negotiate for low rates from copyright holders, and those that they can't come to agreement with are the ones they license under the compulsory license. No need to choose one way over the other.
``And please don't simply cite RIAA's own page of "distributed labels of reporting companies" or the Wikipedia equivalent, because neither of those lists are verifiable of actual paying members``
Yes, as we all know the RIAA falsely claims hundreds of members who are not members.
You are confusing the term "independent label" with the term "non-RIAA member label". An independent label is one that is not owned by one of the Big 4 labels.
I'm no fan of the RIAA, but let's get the facts correct.
Most indie artists are registered with ASCAP, BMI or SESAC. (Most major label artists as well.) Actually, it's the people who write the songs that register with them, as ASCAP and BMI license the underlying composition of a song, not the recording of that song.
The RIAA is involved with the "sound recording" copyright. This is administered through SoundExchange, which began as an independent division of the RIAA but is now a separate company with its board of directors made up of half RIAA types, and half people representing the artists. Under current US copyright law, over the air broadcasters are exempt from paying any royalties to SoundExchange.
The RIAA has nothing to do with ASCAP and BMI. Don't confuse SoundExchange and ASCAP/BMI/SESAC.
While some indie artists want their music played for free, others don't. I was just talking to one at Brunch today, and he was complaining that his royalties from BMI keep going down from year to year. He's annoyed that his music is being played without any compensation to him. Why shouldn't he be annoyed? He doesn't get his apartment for free, or his music gear for free.
Hobby artists are no the same as indie artists. Professional indie artists need to make money from their works. They do that from getting paid royalties when songs they compose are broadcast.
ASCAP/BMI/SESAC royalties are quite reasonable. The current royalty decision (which was driven by RIAA member companies) in many cases is 80-100 times what an internet radio station pays to ASCAP/BMI/SESAC.
There are over 1000 labels that are members of the RIAA. Closer to 1400. Most RIAA-haters think their favorite music isn't released by RIAA member labels. You'd be surprised at how much "indie" music is.
l abels
http://en.wikipedia.org/wiki/List_of_RIAA_member_
The Big 4 labels drive most of the RIAA's nasty behavior. But they're not the only members.
Actually, terrestrial radio is not charged at all for these royalties. It's a royalty only on internet radio services. That's what is so unfair.
Terrestrial radio pays ASCAP/BMI/SESAC based mostly on their revenues though, not audience size. As there is no way to completely accurately measure audience of over the air stations.
Bob Bellin from mp3player.com posted this to the Pho mailing list, which really nicely sums it up:
(AQH is the average concurrent listeners to a stream)
Note that a load of 45,000 commercial units/year is about 5 commercials an hour, much more than what many net stations are playing now.
There is no way that anyone, big or small, could make this work without making deals directly with all the copyright holders. I suspect that the big companies like Yahoo and AOL already have agreements in place with all the major labels. Because of this, they'd only be paying royalties under this statutory license for music with rights not owned by someone they have a deal with. Smaller stations without the clout to make a deal with rights holders would be screwed.
Best case scenario: prepare for lots and lots more commercials!
It will only kill those who try to stay legal. Back in 2002, many webcasters got together, hired a lobbyist, and got the Small Webcasters Amendment passed, which allowed small broadcasters operate on a percentage of revenue model (11% aprox). The new rates start out at effectively 10-40 times what the old rates were, and by 2010 increase by 2.5x. So by 2010, legal net broadcasters will be paying 25-100 times what they paid in the 2000-2005 periods.
Of course, you can just say, screw it, and not pay, and hope you're not noticed. It's actually worked very well for lots of stations out there.
Net radio didn't cry wolf, it sounded the alarm. And only through the listeners and supporters who wrote and called their congress people was the small webcasters act passed.
We are going to have to act again to preserve the state of internet radio as it is. Only this time we should get right to the cause, and act to get the provisions of the DRPA and DMCA that removed the fair use exemptions that over-the-air broadcast radio has from these royalty requirements.
The difference is that over the air traditional radio doesn't have to pay these fees at all. They are granted an exemption under federal copyright law. Only digital/internet radio stations have to pay this fee, as set forth by the DRPA and DMCA. Not fair that mega corps like Clear Channel and CBS don't have to pay these fees for their over the air broadcasts which reach way more listeners, and only internet radio stations do, is it?
Novus ordo said ``You can go to each band whose music you want to play and make a deal with them directly.`` That's only true if the band owns their own copyrights. If the band has been released on CD / (or through online distribution like iTunes), most likely the band has licensed the rights to their track to a label or distributor. That is who you need permission from, not from the artist.
So unless you're talking about bands that are unsigned, or bands that own their own labels, the band/artist is not in a position to license their music for internet radio broadcast!
This is the big misnomer: It's not RIAA music. It's any copyrighted music that a station hasn't been granted explicit permission to play.
In many cases, the artist doesn't own the copyrights, the record label (small, medium or large!) has been assigned the copyrights as part of the record deal made with the artist.
Internet station can survive if they go out and get permission from the copyright holders for every track they play. This is tedious and time consuming, but still economically better than paying under the statutory license.
XM is now using 24-32kb aacPlus for most of their channels. This is much more lossy and low-quality than a cassette. :-)
The comments in the Congressional Record do not make this as bad as it first appears:
The main idea is that ``a company may not provide a recording device to a customer that would allow him or her to create their own personalized music library that can be manipulated and maintained without paying a reproduction royalty.`` This would be if an internet radio station distributed stream ripping software that split tracks and labelled them accordingly.
``This does not mean such devices cannot be made or distributed. It simply means that the business must negotiate the payment for the music outside of the statutory license.`` That would also mean that radio stations that have negotiated deals directly with their artists/rightsholders would be able to do this.
``In addition, if the device allows the consumer to manipulate music by program, channel, or time period that would still be permitted under the statutory license.`` So it's explicitly targeting streamripping that uses the meta data transmitted to split the tracks apart. Not to simple recording a broadcast, as pointed out in the next sentence:
``For example, if a listener chooses to automatically record a news station every morning at 9:00 a.m.; a jazz station every afternoon at 2:00 p.m., a blues station every Friday at 3:00 p.m., and a talk radio show every Saturday at 4:00 p.m., that would be allowable. In addition, that listener could then use their recording device to move these programs so that each program of the same genre would be back to back.``
``What a listener cannot do is set a recording device to find all the Frank Sinatra songs being played on the radio-service and only record those songs. By making these distinctions this bill supports new business models and technologies without harming the songwriters and performers in the process.``. This is largely targeted at Sirius and XM who are selling devices that scan their channels and pick out the tracks that a customer wants to listen to automatically. Basically, a programmable stream ripper in the satellite radio receiver. Devices like the Sirius S50, which are being promoted as an iPod replacement that's automatically loaded with new music from Satellite.
Here is the irony for internet broadcasters:
Stream ripping is possible because the RIAA demanded that net broadcasters send the information on what track and artist is playing, and this got put into the DMCA. This is what led to stream ripping.
Internet radio broadcasters could simply turn off meta-data and prevent track-splitting type stream ripping. Simple solution.
So the issue is that we need to separate DRM from stream-ripping. We don't have to add DRM to stop stream ripping... and DRM would likely stop all stream recording as well.
This is the issue that needs to be presented to congress. DRM is not the solution to the problem they are trying to solve. Of course, the RIAA would love to trick legislators into mandating DRM, because the RIAA doesn't want you to be able to record ANYTHING.
Audible takes the role of the cable company in this model. And even in pay per view, you're paying the cable company, not the program producer. :-)