Further comments on our posts here at Save Our Internet Radio are now closed.

To stay up to date with the latest on the CRB royalty decision and the ongoing negotiations between Sound Exchange and Internet radio, I invite you to visit any of these fine sources:

Radio And Internet Newsletter (RAIN)

Wired Blog on Save Internet Radio

SaveNetRadio.org

Thank you for visiting this site during the early days of the battle to keep Internet radio alive.

Should conditions warrant, we’ll resume postings here to keep you further apprised.

Please remember to support your favorite Internet radio station.

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Just in via RAIN

The Internet Radio Equality Act H.R. 2060 has just been introduced by Representatives Jay Inslee (D-WA) and Donald Manzullo (R-IL ).

The Internet Radio Equality Act (pdf)has just been introduced (in mid-afternoon) by Representative Jay Inslee (D-WA, pictured right) and eight cosponsors, with more cosponsors on the bill expected shortly.

The bill has five major provisions:

* Nullifies the recent decision of the CRB judges

* Changes the royalty rate-setting standard that applies to Internet radio royalty arbitrations in the future so that it is the same standard that applies to satellite radio royalty arbitrations — the 801(b)(1) standard that balances the needs of copyright owners, copyright users, and the public (rather than “willing buyer / willing seller”). (For more detail on this point, read the recent RAIN issue on “Copyright law,” here.)

* Instructs future CRBs that the minimum annual royalty per service may be set no higher than $500.

* Establishes a “transitional” royalty rate, until the 2011-15 CRB hearing is held, of either .33 cents per listener hour, or 7.5% of annual revenues, as selected by the provider for that year. Those rates would be applied retroactively to January 1, 2006. (The logic behind this rate, incidentally, is an attempt to match the royalty rate that satellite radio pays for this royalty — thus the name of the bill.)

* Expands the Copyright Act’s Section 118 musical work license for noncommercial webcasters to enable noncomms to also perform sound recordings over Internet radio at royalty rates designed for noncommercial entities, and sets an transition royalty at 150% of the royalty amount paid by each webcaster in 2004. (Note that this amount would be a set, flat fee through the end of the decade.)

* For future CRBs (e.g., 2011-15), adds three new reports in the CRB process: The Assistant Secretary of Commerce for Communications and Information will submit a report to the CRB judges on the industry impact in terms of competitiveness of the judges’ proposed rates; at the same time, the FCC will submit a report to the CRB judges on the effects of the judges’ proposed rates on localism, diversity of programming, and competitive barriers to entry; and the Corporation for Public Broadcasting will submit a report to Congress and the CRB judges on the effect of the the judges’ proposed rates on their licencees.

Emphasis mine

This is wonderful news folks. But this is no done deal.

U.S. citizens - Your action is needed NOW! Please call your congressperson to ask them to co-sponsor this bill.

Head on over to SaveNetRadio.org for further details.

Inslee says:

“You can’t put an economic chokehold on this emerging force of democracy,” Inslee said in a statement e-mailed by a spokeswoman. “There has to be a business model that allows creative Webcasters to thrive and the existing rule removes all the oxygen from this space.”

Well said sir.

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Jonathan Potter, executive director of the Digital Media Association states that both small and large Internet radio webcasters alike will be driven out of business.

WOXY.COM’s Bryan Jay Miller says operating costs could more than double with the new performance royalty rates handed down by the CRB on March 2nd. WOXY pulled the plug on itself on September 15th of last year due to financial constraints before being resurrected by lala.com in October.

The annual cost of operating WOXY.com could more than double under new rates that Internet radio stations must pay to play music.

“This absolutely would have killed WOXY as a stand-alone operation without a doubt,” said Bryan Jay Miller, general manager of the Cincinnati-based online radio station. “We’re in a little better position than most Webcasters because we are owned by LaLa. We don’t rely on just advertising sales.”

WOXY.com was acquired in October by LaLa.com, a CD trading Web site created by Silicon Valley entrepreneur Bill Nguyen.

Despite the station’s commerce-based support, Miller is alarmed by the proposed “per-performance” rates issued in March by the federal Copyright Royalty Board.

The rates represent a 30 percent increase in royalties paid to the record labels and artists retroactively to January 2006, and 30 percent again in the following three years, according to the Digital Media Association.

“We do think artists should be compensated for their work,” said Miller, a Dayton native. “But you could go from collecting some royalties now to collecting no royalties, because you just killed off the whole industry.”

Increased royalties and a $500 minimum fee per Web channel could silence small Internet radio stations and drive big companies out of the business, said Jonathan Potter, executive director of DiMA. “Paying royalties of 30 or 50 or 75 percent of revenues is not a viable business for a Yahoo or for a Pandora, which is one of the larger Internet Webcasters,” Potter said.

John Simson, executive director of SoundExchange, the group that collects royalties from online radio and distributes them to labels and performers, said that online advertising revenue is growing dramatically. “I think that the judges’ determination was that these were rates that services could pay, or should pay, in a free market,” he said.

Miller, whose online alternative rock station had ceased broadcasting for financial reasons before being acquired by LaLa, disagreed. “Most Internet radio that I know of, especially little independent Internet radio operators, are barely struggling to stay alive,” Miller said.

[..]

Miller said that it’s in the best interest of the artists, record labels and Internet radio operators for the emerging industry to grow. “Because if it grows, everyone wins,” he said. “If you kill it, nobody wins.”

Read the full article here.

Remedial lesson in math for the CRB:

30% of NOTHING is still NOTHING.

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Breaking news from Washington:

The judges of the Copyright Royalty Board (CRB) having reviewed several submissions from a number of parties have now DENIED ALL MOTIONS for ANY rehearings to address the concerns of Internet radio webcasters.

Selected excerpts from the Order Denying Motions For Rehearing follow, emphasis mine:

Having reviewed all motions, responses to those motions, and written arguments, the Judges now deny all such motions.

[..]

Such exceptional cases require the movant to show that an aspect of the determination is erroneous, without evidentiary support, or contrary to legal requirements. The parties made no such showing.

Such motions should be granted only where (1) there has been an intervening change in controlling law; (2) new evidence is available; or (3) there is a need to correct a factual error or prevent manifest injustice.

The parties that request a rehearing in this motion do so based upon categories (2) and (3). We find, however, that none of the moving parties have made a sufficient showing of new evidence or a clear error or manifest injustice that would warrant a rehearing.

So according to the CRB, their decision, which will effectively wipe out almost all of U.S.-based Internet radio - thousands of small webcasters, college radio streaming, NPR on the net, and services like Pandora to name a few categories - is NOT a manifest injustice. Wow.

[..]

While some parties purport to offer new evidence that was not presented during the proceeding, we are unconvinced that this evidence was in fact newly discovered after the proceeding. Indeed, it appears that all evidence discussed in the motions had either been discovered during the proceeding or could have been discovered during the proceeding, with reasonable diligence. Therefore, we cannot grant the parties’ motion for rehearing based on new evidence.

[..]

In absence of an adequate showing for new evidence, the parties’ arguments in their respective motions amount to nothing more than a rehash of the arguments that the Judges considered in the Initial Determination. As such, the motions do not present the type of exceptional case that would warrant a rehearing or reconsideration. Therefore, we deny the parties’ motions for rehearing or reconsideration.

CRB translation: SoundExchange told us you would say this will kill you, and you did say it. And now you’ve said it again. Yadda yadda… Got anything new?

[..]

Other parties request that the Judges stay the implementation of certain of the rates and terms established in the Initial Determination until all administrative appeals and judicial review are complete.

[..]

Moreover, Section 803(c)(2)(E)(ii) of the Copyright Act states that “[t]he pendency of a motion for a rehearing under this paragraph shall not relieve persons obligated to make royalty payments who would be affected by the determination on that motion from providing the statements of account and any reports of use, to the extent required, and paying the royalties required under the relevant determination or regulations.”

[..]
Moreover, Congress determined that these rates would go into effect, notwithstanding any pending motions for rehearing. Finally, Congress set forth the remedy that would apply should those rates later be determined to result in an overpayment or an underpayment of royalties. The provisions of these sections are clear and we will follow the statute. As a result, the motions for a stay are DENIED.

CRB translation: Don’t blame us for refusing to hear your pleas. Blame copyright law. And blame Congress. Not our problem.

CRB to Internet radio: Pay SoundExchange now.

Pull out your wallets, go get a loan from a bank,

or fold up your tent and die. We really don’t care.

Download: CRB Order Denying Motions for Rehearing (pdf)

h/t: Save Net Radio.org

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A new coalition of webcasters, broadcasters, musicians, independent record labels, and music retailers — the SaveNetRadio Coalition — will announce a national campaign to generate public support for Congress to overturn the CRB royalty rate decision this morning via a press teleconference. This years’s 2007 RAIN Las Vegas Summit, is an annual meeting of Internet radio operators and is run concurrently with the terrestrial broadcaster convention NAB 2007.

Internet radio broadcasters battle royalty rate ruling
By Seth Sutel, Associated Press
San Jose Mercury News

[..]

In the weeks since the Copyright Royalty Board’s decision, various parties affected by the new framework have filed objections and asked for a rehearing on certain issues.

Besides a group of small webcasters, a coalition of Web companies including Yahoo Inc. also objected, as did public and other radio stations that would be covered by the new rates.

In the meantime, time pressure is building on the webcasters. Under the ruling, monthly payments under the new rates start coming due May 15, something that Kurt Hanson, founder of the Internet radio company AccuRadio, said would “would wipe out almost everybody” among the small webcasters.

Webcasters are trying to hold off the implementation of the new rates while the appeals process goes ahead. David Oxenford, a lawyer representing a number of parties affected, said he expects the board to act within the next month or so.

On Monday, a group of webcasters is launching a campaign against the new rates in hopes of building public awareness about the issue and potentially getting it considered in Congress.

The announcement will be made at a conference of Internet Radio companies in Las Vegas, which is running concurrently with an annual conference of the National Association of Broadcasters, a national television and radio industry group.

With many members of the NAB also affected by the royalty ruling, NAB spokesman Dennis Wharton said it was sure to be a topic at the conference, which runs through Thursday. Wharton called the royalty decision “disappointing” and said it has “the potential to cripple a fledgling new technology.”

The royalties in question only apply to digital broadcasts of music, such as over the Internet. If a traditional radio station streams music from its Web site, it must pay the online rate in addition to a royalty paid to music composers.

[..]

Public radio stations had been able to stream music under lower rates than commercial stations, something that could end under the new ruling.

Ken Stern, chief executive of National Public Radio, said that would reverse decades of precedent in treating public radio differently from commercial radio. He said the new rates would leave public radio stations “with a draconian choice of cutting services or raising money that we don’t have.”

Full story here.

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As an undergraduate, I worked for four years at our college radio station, WJCU 88.7 FM in Cleveland. We began doing audio streaming over the Internet to supplement our transmitter, which was only 1000 watts. Streaming over the Internet allowed our college station to be heard around the world. Regular listeners tuned in to my program from across the country, including my parents and other relatives. My parents live far outside the broadcast range of the radio station, and they never could have enjoyed my program without Internet streaming. Now that I’ve graduated and moved on, I still listen to WJCU over the Internet. That link keeps me in touch with recent trends in college radio and involved in my old college radio station.

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I listen to Bluegrass music over the Internet on a daily basis, usually while at work, for up to 8 hours each day. I never heard Bluegrass music before stumbling across it on the Internet.

My local FM radio market is dominated by ClearChannel, like so many others around the nation, and they obviously don’t have Bluegrass stations. Because of Internet radio, I have started collecting CD’s of Bluegrass musicians that I never would have known about otherwise. I recently purchased the Grascals’ latest CD, and also Blue Highway. I also seek out Bluegrass concerts now, usually involving musicians whose music I know from Internet radio. Furthermore, I actually bought a banjo last week. It’s safe to say that I’ve become a hardcore Bluegrass fan, and I owe it all to Internet radio.

Ryan Pry
Radford, VA

* * * * * *

I was a full time country music broadcaster for over 35 years, and fortunately worked for owners who liked and wanted to broadcast Bluegrass and old time country music to their listeners. Then I left the station due to family circumstances.Country music was also changing and the stations stopped playing the legends, and their fans had nowhere to go to hear them or their music. I begged and begged stations to let me do a Bluegrass and ole time country show, and sometimes I won. I found a few low power stations out in the country that would air my program. I even had to buy time on some to get them to take the program.

[Stations today] only play a select market or genre of music. Anything that doesn’t make them loads of money they do not play. Where are the people going to find music like Bluegrass, Ole Timey and acoustic music? Then along came the Internet and now people who have starved for this genre of music around the world can still listen, not only for their pure enjoyment but also to keep the music alive and the performers and artists out in the public.

Festivals need people to come, and we provide them an avenue to get the word out. Those record labels who want those same people who want those artists to sell their recordings reach millions who will buy them. Now why would anyone want to destroy that?

Now I don’t have to beg or borrow to have a place to bring this wonderful music to the listeners, who now only have to turn their computers on.

Billy Dunbar
Des Moines, IA

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I’ve always loved music and when I discovered Contemporary Jazz and what was referred to as New Age music in the middle 70’s it changed my life! The genre of New Age is now referred to as Ambient and it has crossovers that link with Contemporary Jazz referred to as Lounge and Downtempo. I had noticed a dramatic decline in record stores of albums that I could purchase to add to my already large music collection in this area until one day a brother of mine turned me on to some of this music that had found a home on the Internet. I now am back in contact with the music I so dearly love thanks to many fine Internet radio websites all over the world! It resulted in my computer being connected to my main stereo system for the ultimate in sound reproduction. I cannot thank these broadcasters enough; I am now able to hear the music of many electronic music composers I could never have experienced in the narrowcasting world of FM Stereo radio!

Many of you may remember the radio revolution that occurred in the late 60’s and early 70’s. It was driven by a reaction to the poor programming quality of radio stations of that period. It spawned the Album Oriented Rock revolution that changed the very face of FM Stereo broadcasting back then. It is sad to see that the first revolution fizzled, but it was forced out by greed of the RIAA and the NAB whose sole interest has been to produce and broadcast the cheapest possible music and rake in the highest possible profit! They have supported the biggest record companies in their effort to shut down smaller more creative labels, such as Private Music (originally created by Tangerine Dream’s Peter Bauman), by cutting off their ability to distribute albums to record stores.

Well, a second broadcasting revolution is occurring and it is Internet Radio! The Internet provides an opportunity once again for these creative and experimental electronic music composers to get their music heard by audiences all over the world on the modern digital computer which is rapidly becoming an important part of the modern stereo system. These broadcasters know it is only a matter of time before this music spills onto the conventional airwaves with the same dramatic effect that the last revolution had in the ‘70s! They will do anything to prevent it!

The fact of the matter is that over the air broadcasting has become a wasteland! Duplicitous formats, more attention to advertising and promotions than music and extreme compression and overmodulation are more and more turning off listeners who are fleeing to the Internet and staying there…I am one of those! Therefore I will not stand idly by and watch these greedy, money-hungry record companies backed by the RIAA take away the radio I love. All of us who love Internet radio must now stand and fight! We must not let these greedy people increase the rates for broadcasting music. These rates don’t get to the musicians themselves but line the pockets of middlemen whose time has passed! It’s time for a change and Internet radio is leading the way!

Allen C. Morse III
San Diego, California

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In today’s issue of The Harvard Crimson, the likely impact of the recent CRB decision upon college radio is discussed.

WHRB - Harvard Radio Broadcasting Co., Inc. is a private, non-profit corporation operated on a volunteer basis by undergraduates at Harvard College.

RIAA Tacks on New Fees, Threatening College Radio

RADIO FREE HARVARD
Published On 4/6/2007 1:24:27 AM
By EVAN L HANLON and KIMBERLY E. GITTLESON
Crimson Staff Writers

Although internet radio may be a strange, hybrid beast, something about “tuning in” online—perhaps it’s niche music communities, perhaps more listener control—has made it an island of success in the otherwise tempest-tossed contemporary broadcasting industry.

But stormy skies threaten the future of webcasting.

Recent legislation aimed at correcting the copyright errors of the past and preventing the copyright infringements of the future is jeopardizing the ability of internet-only radio stations and smaller terrestrial stations (such as college and high school stations) to continue with their online programming.

The prohibitive costs of the legislation, coupled with difficult logging and tracking procedures and the favoring of large stations over educational and internet-only stations, threaten to turn the internet radio community into yet another ClearChannel playground.

Unlike other countries, the United States requires terrestrial radio stations to pay licensing fees only to song composers, instead of paying royalties to composers and performers.

Organizations such as Broadcast Music, Inc. (BMI) and the American Society of Composers, Authors, and Performers (ASCAP) have long collaborated with both large radio stations, and college stations, requiring the stations to log what they play for a given period of time—usually three days—and then assigning a certain fee to the stations based on the artists they represent. These companies have already included a web-streaming fee in their agreement.

However, BMI, ASCAP, and others only represent the composers, and due to legislation proposed in 1998, digital broadcasters (i.e. webcasters) now have to pay royalties to performers as well. The major players (from large commercial radio stations to educational stations) have been wrangling in Washington to determine how much stations need to pay and how much of their programming they need to report.

Enter SoundExchange, an offshoot of the Recording Industry Association of America (RIAA) that acts as a royalty collecting agency for performers. Unlike BMI and ASCAP, SoundExchange seems determined to be anything but friendly to the stations it interacts with, particularly the college radio broadcasters who are attempting to negotiate a different rate for educational stations (full disclosure: WHRB is one of the negotiating parties).

[..]

Internet radio’s low overhead allows for stations to broadcast on a shoestring budget and still access a worldwide audience. For some college stations that only have small transmitters or broadcast in small communities, streaming actually becomes the main source for listeners.

The newest SoundExchange royalty rates are so dangerous to internet radio because they effectively eliminate both of these advantages to streaming. Not only will royalties see a 150 percent increase over the next five years, but a $500 fee per channel will also be introduced.

[..]

These prohibitive costs will force internet radio towards the current commercial model of terrestrial radio. College radio stations and other small stations will undoubtedly find the cost to be too high, forcing them to either stop streaming, increase advertisements, or negotiate directly with the RIAA for different terms, lengthening the already lengthy legal battle.

With SoundExchange holding all the cards, internet radio may quickly find itself being bullied into a model the recording lobby finds most profitable.

Such a model precludes the more free-minded and eclectic programming so often found on internet radio and could force streamers to use content burdened with Digital Rights Management technology, bringing all the baggage of illegal downloading to streaming radio.

While SoundExchange may be looking to fix the mistakes of the radio industry from years past, it does so without recognizing the state of radio today. It may not kill internet radio, but it is certainly doing its best to limit its potential.

Read the complete article here.

More information on college, university and high school streaming can be found at the website of Intercollegiate Broadcasting System (IBS)

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John Simson got bored today and decided it was time to trot out the same tired paragraphs quoting unknown bogeymen while continuing to ignore the pointed statements of Internet radio webcasters. Simson’s latest offering containing no new material facts or fresh evidence supporting his organization’s position is excerpted here:

SoundExchange Urges Copyright Board to Reject Calls to Reduce Music Artists’ Royalties

Webcasters unable to present new facts, Artists and Others in Music Community Calling for Fair Payment for Their Music

WASHINGTON, April 2 /PRNewswire/ — SoundExchange today filed with the Copyright Royalty Board (CRB) its opposition to the webcasters’ motions for reconsideration submitted earlier this month in the webcasting rate case. The webcasters are attempting to convince the CRB to reconsider its decision regarding royalty rates paid to performing artists and record labels for the use of their sound recordings in connection with Internet radio. Noting that no new material facts or fresh evidence has suddenly
materialized to give the CRB valid reason to revisit its decision, SoundExchange is asking that these motions be summarily dismissed.

SoundExchange noted that over 14 months of proceedings the CRB reviewed thousands of pages of evidence and heard from almost 50 witnesses (including many experts) from all interested parties before issuing a comprehensive 115 page decision. “Just because you don’t like the outcome of a fairly played game doesn’t mean you should ask the referee to order the game replayed,” said John Simson, Executive Director of SoundExchange. “Yes, Internet radio is important to the music community, but that doesn’t mean that artists and record labels don’t deserve fair compensation for their works.”

Fair compensation — let’s review what that is again, or at least in the eyes of SoundExchange: For Internet radio webcasters, already supporting artists and copyright holders by paying performance royalties, fair is seeing those rates skyrocket to the point where many stations predict near-instant business failures. Also fair in the eyes of SoundExchange, is to have traditional over-the-air broadcasters continue to enjoy a free ride - paying nothing whatsoever in performance royalties. This must be the definition of fair compensation for SoundExchange.

Seems to me Mr. Simson, you are merely going to seriously damage those who are already paying royalties while continuing to allow those with lots of lawyers and lobbyists the opportunity to continue to pay NOTHING. Please explain it for me once again, which part of NOTHING is fair compensation?

Without providing any fresh evidence to support their push to pay artists and labels less, some webcasters, who have enjoyed flat rates for seven years and were well aware of the CRB proceeding, are now crying foul. But the CRB, in objectively looking at the facts and the arguments presented by both sides, determined a fair market rate that artists should be paid for their work and creativity.

Who or what is it that determines that fair market rate in your world Mr. Simson? You? Market forces? Supply and demand? Competition at the wholesale and retail levels? Payola legal defense costs? Three mis-guided men? The Magic Eight Ball?

Simson noted that artists across the country are aghast at the negative reaction of some in the internet community to paying fair value for musical works. “The fact is we don’t appreciate those who take music for granted,” said Simson. “Artists should be paid for the value of their hard work, their investment and their creativity. We value internet radio and are certainly interested in working with them to encourage a vibrant marketplace.” Simson noted that it is a vocal minority that is making these unfounded claims about the new rates, and that artists and labels are supportive of internet radio and want to see it flourish.

Mr. Simson, who are these “artists across the country” who “are aghast” ? Where are they? How many are there? Three artists continent-wide would certainly be ‘across the country’, by your definition, I suppose. Can we see their full quotes that prove these artists understand the underlying issues and the disparity in performance rights paid by Internet radio versus terrestrial radio?

And again, these mysterious people you once again refer to as “those who take music for granted” ? Certainly, I’ve never become aware of any such person in my travels on various Internet radio discussion forums in these last four years. Internet radio listeners are very passionate about their favorite stations and the music those stations play, and a cursory read through the comments on this site - a site with no particular allegiance to any station or genre of music - will readily reveal that.

“Unfounded claims” is your characterization Mr. Simson. Please go ahead and refute the calculations that those supposed vocal minority stations have put out for examination. Show us where the Internet radio webcasters have got it all wrong by pointing out their errors so you may confidently assure us listeners - both the passionate type and “those who take music for granted” - of the ongoing viability of our favorite Internet radio stations.

I’m confident your next press release will explain in detail where all these industry experts are so vastly incorrect. Excuse me now, as I have to find my Magic Eight Ball to determine if I should use the same numbers as last week for what must surely be my winning lottery ticket.

The full SoundExchange press release is found here.

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