Radio is music made social. When we began Creamy Radio over five years ago, it was primarily to turn people on to music that they might not normally hear: indie bands who’d never see the light of day on the FM dial; local artists whose reach might not go beyond their corner of the country; even mainstream artists who may not be known beyond their album single.

In 2002 when the Copyright Office set royalty rates for Internet radio stations, we were prepared to close our virtual doors. The rates were so exorbitant that many well-established stations had little hope of affording the cost, much less a fledgling station such as ours. There simply wasn’t a feasible way to make enough money to cover the fees.

Thankfully the Small Webcaster Settlement Act of 2002 was introduced that set up a more reasonable royalty scale based on percentage of revenue/expenses. While not ideal, because of this arrangement, webcasters like us found room to grow, and as we did, contributed more back in royalties.

But the new rates put in place by the Copyright Royalty Board once again threaten the existence of nearly all independent Internet radio broadcasters. As many have already pointed out, even the 2006 rates create a nearly insurmountable financial barrier that most independent broadcasters cannot meet, much less surpass. And those rates will more than double over the next five years.

Fear of the Medium

As Bill Goldsmith of Radio Paradise noted in his “The View from Paradise”, FM stations avoid paying most of the royalties that webcasters are subject to. The question arises: why single out the medium of Internet radio?

With Creamy Radio, we designed a station with a variety of music to entertain the listener and expose the artists. The reward comes when a listener finds that hidden gem of a band that has somehow escaped them all these years; when someone in Maine stumbles onto a breaking indie playing in our hometown of Tempe, Arizona; when a listener in turn recommends to us a band that they have discovered.

That’s the beauty of what Internet radio has become: a musical environment where options have increased a thousand-fold over terrestrial radio. If you’re a fan of the music of a certain genre, or subgenre, or era, or region, or instrument, there’s a station out there playing the best of it. Or, like Creamy Radio, where we play a diverse range of music.

But because our broadcasts are sent through cables to computers instead of airwaves to radio, we are subject to exorbitant royalty rates, even though the two are not substantively different. Radio is radio, despite the delivery method. The story is as old: set the barrier of entry, or continuation, for Internet radio so high that none but the few biggest entities can survive.

Age of Reason

Internet radio is a boon to the music industry, not a danger. It provides exposure for the hundreds, if not thousands, of artists that don’t benefit from increasingly narrow marketing and placement. It is also a boon for listeners, giving them the ability to indulge a narrow taste or broaden their range. A royalty system that expels the majority of webcasters from operation can only hurt the music industry as a whole.

And royalty rates cannot rely on the artificial schism that seeks to paint terrestrial and Internet radio as different creatures. As Creamy Radio moves forward, we want to continue to support the artists in our playlist, both mainstream and independent, but we can’t do that if we can’t afford to operate. When rates are out of reach for even the biggest independent webcasters, something is amiss. And if this comes to pass the end result is a loss of revenue for artists.

As an entity not yet profitable ourselves, we cringe at the idea of continuing to pay royalties not applicable to the entrenched competition, let alone at rates so out of scope compared to our other royalties. We object to the idea of our product not being judged for what it is: an avenue that is just as, if not more, promotionally valuable to artists and copyright holders than terrestrial radio. While we may find a settled royalty rate, the time has come for legislative or legal action to eliminate this gross error by Congress. Without it, the variety and scope you have come to love from Internet radio will come to end.

Derek Grimme and David Gould
Founders, Creamy Radio

I spent 12 years in Southeastern Indiana on the listening fringe of the last great terrestrial rock station, WOXY. For years, I listened when I could, though that was usually only in the car and only in short bursts. It wasn’t until years later, when woxy.com had emerged as an Internet-only station and I had a place to listen to it full time, that I was truly able to appreciate the beauty of this great station.

A year ago I was a fast fan of the new album from Rainer Maria, an established band but one few terrestrial stations were likely to even sample, let alone playlist. The day I got the group’s CD, its last, as it would happen, my 10-year-old son and I listened to it together. Like I had been, he was immediately hooked. Two months later, he and I saw Rainer Maria and three other bands at an all-ages show in Chicago, where he stood out by standing lower than anyone else in the audience.

I’d been to many shows during my teens and 20s, but no concert experience will ever mean as much to me as the first one I attended with my oldest boy. And it wasn’t some mindless teen act force fed to him by the Disney Channel or other popular sources of entertainment, but a quartet of hard-working musicians trying to carve out a place in the musical world. Bands that neither he nor I would have ever encountered if it hadn’t been for woxy.com and Internet radio.

Dan Markham

Portage, Indiana

I’ve been a little occupied with a lot of things in the last few days, so forgive the lateness of this link, as I catch up with what others are saying.

Ted Leibowitz of BAGeL Radio ponders whether the left hand at the record labels knows what its right hand is doing. Ted also brings us back a few decades to remind us we’ve all been here before.

BAGel Radio: It’s Hollywood vs. The VCR All Over Again

SoundExchange, arguing for the rate increase, says that internet radio provides no promotional benefit to artists. SoundExchange is made up of record label executives.

If internet radio provides no promotional benefit to artists, why do record labels, radio promo companies (hired by record labels), and bands send 30-50 CDs a week for airplay consideration on BAGeL Radio?

One industry hand clearly doesn’t know what the other is doing, and despite this obvious inconsistency, a government entity called the Copyright Royalty Board adopted the rates and payment structure recommended by SoundExchange . . . almost to the letter.

Some of you will remember that industry has tried to kill/regulate new technology in the past: the music industry freaked out about CD-burning computers in the 1990s, the film & television industries freaked out about VCRs in the 1980s, the music industry freaked out about cassette recording in the 1970s…well, here we go again, only this time the medium is so new and far-reaching, the industry remains Mr. Magoo-like in it’s inability to see the big picture, and the government is so comfortably seated deep in the warm, lush pockets of big business, that the music industry is getting it’s short-sighted, ultimately self-defeating way.

Independent internet radio will die if this decision is not reversed.

I wonder if some of the ‘brilliant minds’ at the RIAA are taking a verbal motif from Battlestar Galactica just a little too seriously: All of this has happened before, and all of it will happen again.

Well, the first part we can certainly agree on. And when we get this crazy situation resolved, can we ever trust it won’t happen again? Only time will tell.

Ted also notes some interesting statistics here:

Did you know that 1 in 5 U.S. consumers 12 and over listen to internet radio?

The new semi-annual study from Bridge Ratings & Research indicates the number of monthly Internet radio* listeners nationwide has jumped 26% over last year and has increased to 72 million monthly listeners from 45 million at the end of 2005.

Do you think any ClearChannel money/muscle might be involved in this push to eliminate independent broadcasters?

Now that kind of information does make one pause and think a bit.
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Some SOIR site news: I’ll be adding a new page to the site in the next day or so, to link to selected media reporting on the ongoing events as they happen.

Also, watch for our first posting of a submitted story from an Internet radio listener shortly. We hope to make your stories on how Internet radio has affected you a regular feature.

We’re seeking stories from Internet radio listeners about the impact that your favorite stations have had on your life, and what a loss it would be for you personally if those stations were no longer available.

Including:

As a very brief example: I would never have attended the Blue Man Group concert, if not for hearing BMG on Radio Paradise and reading some comments from fellow listeners about the group and their spectacular concerts. I had never heard of them before — their TV ads for Intel meant nothing to me at the time, other than being kind of cool. I had no idea these blue mime dudes actually made music. Their concert here goes down as one of the coolest WOW-factor shows I have ever seen.

So go ahead, tell us your story. Please send your submissions to [e-mail address removed]. While we can’t publish them all, we definitely appreciate your stories about how listening to Internet radio has affected you and your enjoyment of this vast world of music. If you have a blog or website and would also like us to link to your story there, please include the link to your story with your e-mail to us.

1. Sign this online petition and open letter to the US Congress.

2. Send an email to your members of Congress. You can use our suggested text, or write your own.

3. Print out the email (you’ll get a copy) and mail it to your Congresspeople. Follow up with a phone call. You can look up their addresses and phone numbers here.

4. Write a letter to the editor of your favorite magazines and newspapers. If you know someone in the media, let them know what’s going on. Have them read my post below, if you like.

5. Don’t panic. Together we can save the medium that we all love. We have the passion to make it happen!

6. Digg this post to help spread the word.

I’m Bill Goldsmith, and my wife Rebecca and I have spent the last seven years of our lives pouring our hearts, minds, and financial resources into Radio Paradise. We are now faced with the very real possibility that all of our efforts will have been in vain, and that the thousands of people who are devoted listeners to our station will have it snatched out of their lives.

I have been in love with radio all of my life, and spent 30-odd years dealing with the conflict between my vision of radio as an art form and my FM-station employers’ vision of radio as a conduit for advertising. I have watched the medium that I love turn from an essential part of the process of connecting those who love making music with those whose lives are touched by it into a mindless background hum of advertising and disposable musical sludge.

With the advent of the Internet, we were finally able to bring to life the radio station I had always wanted to work for (and listen to): commercial-free, passionate, and embracing a wide universe of musical treasures, from the classic rock artists I grew up with to the latest indie discoveries, with a liberal sprinkling of world music, electronica, jazz, even classical. We have slowly built up a loyal audience and have been able to support ourselves while living our dream.

An Exciting - But Fragile - New Era for Radio

The Internet has changed radio in a profound way. Instead of a business that required investments so huge (millions of dollars for even a small-market FM station) that a programming focus on the lowest common denominator and an extreme aversion to risk or experimentation was an unavoidable consequence, a radio station with a global reach was now within the grasp of anyone with the talent and determination to make it happen.

Every day we hear from listeners who are profoundly touched by our efforts - by the music we play, by the way we assemble the songs into meaningful sequences that are more than the sum of their parts, by our passion for what we are doing, and our commitment to never contaminating the music with advertising. And our station is but one of many who have attracted that kind of passionate following, and provided that kind of outlet for radio artists like myself.

The Internet’s paradigm-shifting gift to radio programmers and music lovers - at least those in the US - is now in danger of being taken away by the misguided actions of the US Copyright Board. The performance royalty rates released by the Copyright Board on March 1, 2007 are not just extreme, not just burdensome. They are a death sentence for all US-based independent webcasters like Radio Paradise, SOMA-FM, Digitally Imported, and many others.

The facts and figures of the new rates are detailed in Kurt Hanson’s newsletter for 3/2/07. Kurt’s analysis of the financial impact of the new rates is entirely accurate, and chilling.

The Artificial Analog vs. Digital Divide

There has been much discussion about how unfair these rates are, but our listeners find one fact particularly appalling: while Internet stations like ours are being told they must pay royalty fees that exceed their income, sometimes by several times over, FM stations - including those owned by media conglomerates like Clear Channel - pay nothing at all!

Yes, both FM stations and Internet stations pay royalties to songwriters and/or music publishers. But the royalties in question are owed to the owners of performance copyrights, which means, in most cases, record companies - and to them, FM stations pay nothing at all.

How is it possible for such a massive disparity to exist? For the answer to that we need to go back to the 1990s, when music industry lobbyists persuaded Congress to include wording in two pieces of legislation (the Digital Performance Right in Sound Recordings Act of 1995 and the Digital Millennium Copyright Act of 1998) that drew a sharp division between analog and digital broadcasts. Their reasoning was that a digital radio transmission was not a radio broadcast at all, but a sequence of perfect digital copies of music performances provided to the user, who could then copy them rather than paying to own a CD.

This is a profoundly flawed piece of reasoning, but members of Congress (who at that time had no idea how this whole digital thing worked) accepted it at face value, and agreed that it was only fair that digital broadcasts be subject to additional copyright fees, to be determined by an impartial (in theory…) ruling by the Copyright Office.

Let’s Get Real About This

Let’s reassess that reasoning in the light of 21st-century reality. Is there, in truth, a fundamental difference in the experience of an online listener to Radio Paradise and someone who was listening to identical programming on an FM station? Every one of our listeners - indeed, anyone who has ever clicked on a webcast as background music while working - knows the answer to that question. No! There is no difference whatsoever. Radio is radio, whether it comes in digital or analog form.

As for the recording angle, I would challenge any random group of RIAA lawyers, copyright judges, or members of Congress to listen to a digital recording of our radio station and a high-quality cassette recording of an analog FM station and tell which was which. I guarantee that they could not. The differences in quality are too subtle for all but the most discerning listener to notice.

The quality jump between AM and FM broadcasts was an order of magnitude more significant, yet the music industry managed to thrive their way through that transition. The advent of decent-quality cassette recorders in the 70s, coupled with stereo FM broadcasting, made it possible for anyone who wanted to to make copies of their favorite songs from the radio, with a quality not too different from the analog LPs sold at the time. Did that spell a death-knell for the music industry? Not hardly. The 70s and 80s saw a phenomenal growth in the sales of LPs and, later, CDs.

Ah, but the music industry thought that home music recording would destroy their sales, and lobbied unsuccessfully in the 1970s to cripple that technology. The same fear-based and misguided reasoning popped up again in the 90s, with the advent of digital recording and broadcasting, and this time the industry - flush with dollars earned after their earlier fears were proved groundless - succeeded in this attempt to preserve their bottom line at the expense of, well, pretty much every one else.

A Grave Disservice to The Public

Crippling an exciting, groundbreaking industry like Internet radio is certainly not in the best interests of the public, nor that of musical artists, and not even - if history is any judge - of the music industry itself. Just as they were unable to see how the advent of home music taping actually spurred the sale of LPs and CDs, they are unable to tell exactly what impact Internet radio and other forms of digital media will have on the future of their industry - and to behave as if they do know, and for Congress to go along with them, is a grave error, and public disservice, that needs to be recognized and corrected.

So, if we are building a business - even a non-commercial business like Radio Paradise - by the use of copyrighted material, isn’t it fair that we pay for its use? Perhaps it is. But the fact remains that what we are doing does not differ in any substantive way from what a company like Clear Channel is doing, and to move forward under the fiction that such a distinction exists is neither fair nor rational.

Perhaps the most equitable solution is for all broadcasters - analog or digital, terrestrial, satellite, or Internet - to pay such royalties equally, just as they all pay more or less equally for the use of music compositions. This is the situation in many other places in the world, including most of Europe. The fact that the US broadcasting lobby has successfully out-spent and out-maneuvered the music industry on this issue should not be “balanced” by Internet radio royalty rates so high that they cripple that entire industry.

That kind of reform will take some time - time that people like my wife and myself just don’t have. We are hoping that we can, along with a small group of other independent webcasters, negotiate a separate settlement with the RIAA, similar to the one we negotiated in 2002. That agreement allowed us to operate by paying a royalty equal to 10% - 12% of our gross income in performance royalties. That has been enough of a burden for a struggling “mom & pop” operation like ours, but it has allowed us to survive since that point. However, that agreement has expired, and we are now liable for royalties, retroactive to the beginning of 2006, that are equal to approximately 125% of our income.

Trust me, it has been difficult to write those checks knowing that the foundation that the entire royalty structure is based on is a lie. Perhaps we will succeed in negotiating a new deal with them. If we do, it will probably be at a significantly higher rate - creating even more of a burden on small businesses like ours.

My question is this: why should we continue to be penalized for the mistakes made by Congress back in the 1990s?

What’s The Solution

The truly fair solution is a moratorium on the collection of any fees and the imposition of any penalties until Congress has had the opportunity to revisit the decisions they made a decade ago, and see if there is not in truth a profound wrong that deserves to be righted.

We are at a fork in the road. Down one path is a radio universe populated entirely by large corporations, who can either afford the legal firepower necessary to negotiate a reasonable settlement with the music industry (such as the satellite radio companies have done) or can afford to offer Internet radio as a “loss leader” (as Yahoo and AOL do).

Down the other fork we are presented with a universe of choices, freely available to all, produced by people who truly love and value what they are doing - including user-programmed channels such as those offered by lala.com, “discovery” channels such as those available at Pandora, and who knows what else in the coming years. None of those choices are viable under the new rate structure, and that would be a tremendous loss for all involved.

Late last Friday night, I logged on to the website of one of my favorite Internet radio stations to check on the goings on and got one hell of a rude shock. The RIAA, via their royalties arm SoundExchange, had just issued a death warrant that morning for much of Internet radio, as I have known it for the last four plus years.

I can’t possibly convey the utter horror this means to me after being able to listen to the incredible diversity of music that can ONLY be found on the Internet.

Around four years ago, I made a switch in my radio listening habits that can only be described as life-altering. Here’s my story:

I’ve disliked commercial radio for almost as long as I can remember. When I was a teenager on Vancouver Island, like most teens eventually do, I discovered music. Unfortunately, the only radio station we had there was the local AM radio station. Sorry – but that just didn’t cut it for a teen whose very first acquisition in life after a ten-speed was a decent stereo system. I quickly discovered I could pull in the Vancouver FM radio stations by just adding a chunk of wire for an antenna.

Now the Vancouver stations didn’t keep me happy for very long. Something was missing. Turning the knob on my receiver, I discovered KYYX out of Seattle, WA. Wow! These guys play great music! They play stuff I’d never heard of even on the Vancouver stations. Way cool. I was an instant fan of the station. Hell, I even went off to a t-shirt shop and got myself a nice bright yellow t-shirt complete with some add-on funky blue letters that said “I get my kicks on KYYX”. What a smug son-of-a-gun I was.

Fast forward to the 80’s, and I’m now in Alberta. Sure, the big FM stations in town have me interested in the tunes. But holy cripes, there’s sure a preference for putting the DJ and his huge ego first, before the tunes. And talk talk talk, do these guys ever shut up? I was now starting to understand the pattern of commercial radio – it’s all about building upon the personalities of the DJ and the station. And playing obnoxious commercials. Music? What’s that? Sure, I guess they play some good tunes, when they’re not busy yammering on and on while playing crap commercials every three songs. And could they remember to tell me what they just played please? But they were too busy stepping on the music with their DJ patter/blather.

Finding it time to rest my ears from all that noise and hearing the same tune played a couple of times a day, I turned to another FM station – an all news format. Yes, all news, all the time. Okay, so I’m also a news junkie. This worked for me for quite a while. Tune into some music until I could take it no longer, then back to the safety of my all news station.

In the evenings, I did find one local FM station playing some very cool stuff – but only in the evening, on just this one DJ’s show. There I was introduced for the very first time to the music of Andreas Vollenweider, Mannheim Steamroller and the amazing Canadian guitarist Gaye Delorme. Wow! This was new and interesting music – but damn, I had to wait until the evening to hear it.

Then one day, I turned on my radio to find my all news station had gone off the air – and for good. There was no money to be had in the all news format it seemed, because there wasn’t much in the way of commercials, due to lack of listeners (except us hiding out from the FM stations) … well you can see how that vicious circle works.

What to do, what to do? One morning, I found on the dial the special gem that is our regional public radio broadcaster – CKUA. On the air was Cathy Ennis with her show The Listening Room. She had a low-key voice (as did all the CKUA DJs) and she played wondrous music I had never heard ever before! I was instantly hooked. Hello Angelique Kidjo! Hello Shawn Colvin! This was finally my home. Sure Cathy’s show only ran for a few hours in the weekday mornings, but that’s where I was doing most of my listening. In exchange for this bliss, I just tuned out my ears when the aural cacophony known as the Call of The Land aka a prairie farm report came on during the noon hour.

And then one very confusing dark day, Cathy was no longer there. Shock. Horror. What will tomorrow without Cathy be like? Her eventual replacement was to be a DJ who for sure was low-key. But his choice in music made no sense to these ears. And he committed the ultimate sin every morning, with nearly every song – he repeatedly stepped on the music, just so we could hear his voice announce the track. Aggggghhhhh.

So four years ago, and now without a radio ‘home’, I found myself playing around with WinAmp. And there it was that I stumbled upon THOUSANDS of radio stations – all available at the click of a mouse. WOW! Look at that selection. And the rest you could say is history. I’ve been evangelizing all the goodness that is Internet radio ever since.

So here we are today, and once again, someone has decided they are going to take my music away from me. The music I enjoy each and every day - and the stations who have introduced me to new artists and music almost every single listening day. They want me to say my goodbyes as they prepare to take it all away.

I don’t know about you, but I’m NOT going to allow my favorite music to be taken away THIS TIME, not if there’s anything I can do at all about it.

Welcome to SaveOurInternetRadio.com. If you are like me and also not willing to have YOUR music and YOUR favorite Internet radio station(s) ripped from your ears and soul and want to know what you can do about it, then stay tuned. We have only just begun.