July 13, 2007 2:32 PM PDT

FAQ: Net radio's mixed signals

The saga surrounding recording industry-backed fee increases for Internet radio DJs has been raging for years, and the latest chapter surely won't end this Sunday, when contentious new rules are scheduled to take effect.

On one hand, Webcasters large and small, commercial and noncommercial, have been fighting a decision earlier this year by the U.S. Copyright Royalty Board that they argue, if left untouched, could put them out of business. They've also landed support from thousands of independent musicians who say they rely on their services to pick up listeners they wouldn't otherwise reach.

On the other hand, commercial artists and record labels allied with a recording industry royalty collection body called SoundExchange argue the changes are necessary to ensure fair compensation for their work. So far, both the CRB and federal courts haven't disagreed.

Private negotiations have been ratcheting up as the deadline for the new payments approaches, and discussions about a number of alternative offers to the CRB decision appear likely to continue into next week. Encouraged in part by a closed-door Capitol Hill meeting on Thursday, the negotiators have been expressing increasing confidence that a resolution can be reached, although it's unclear whether that will happen before Sunday.

CNET News.com has compiled a list of answers to the pertinent questions listeners may be asking.

What's this I've been hearing in the blogosphere about Webcasters being saved from complying with the July 15 deadline? Didn't a federal court just deny that request?
It's true that on Thursday, the U.S. Court of Appeals for the District of Columbia rejected a petition by large, small and noncommercial Webcasters to delay the onset of the new fees. From there, it gets more complicated.

Later that day, Webcaster, SoundExchange and recording industry representatives met with about half a dozen members of Congress on the Hill. At that meeting, SoundExchange Executive Director John Simson outlined a number of offers that his group has made to Webcasters. One of them was characterized by published reports as a pledge to delay enforcing collection of the new fees until all of the negotiations had ended, which prompted much rejoicing among the blogosphere.

The trouble is, Simson's statement was misinterpreted, SoundExchange spokesman Richard Ades told CNET News.com on Friday. What Simson really meant was that SoundExchange has already offered to freeze "small" Webcasters' required payments at historic levels through 2010.

"Assuming that those negotiations conclude successfully, then the small Webcasters would be paying the old rates, so it would not make sense for them to start paying the new rate," Ades said. But if the negotiations break down, then the new rate prevails, he added.

In short, nothing is set in stone yet, and SoundExchange is urging all Internet radio operators to "follow the law"--and perhaps to consult an attorney as well.

Then what does all of this mean for Internet radio listeners? Will I have fewer choices for music come July 15?
It's still not entirely clear.

Some who frequent smaller stations may have already noticed disruptions. According to the advocacy group SaveNetRadio, which has been lobbying for changes to the new rules, hundreds of stations have already shuttered their operations out of fear that they couldn't keep up with the new rates. Various published reports have named a year-round Christmas song station and a couple of jazz channels among the casualties.

Nothing is set in stone yet, and SoundExchange is urging all Internet radio operators to "follow the law."

Others have said they're encouraged by reports about the perceived progress being made in negotiations with SoundExchange and may rethink shutting down. But as we've already noted, small Webcasters haven't yet secured any formal immunity to the higher fees.

Representatives from some of the larger services--Yahoo's Launch, Live365 and Pandora--told CNET News.com that listeners probably will not notice any changes, at least at first. Others, like AOL Radio, still weren't exactly sure what's going to happen. National Public Radio said there won't be any immediate changes to the way its stations stream online music to their listeners, thanks to a last-minute agreement with SoundExchange. But the deal is only temporary, and negotiations are expected to continue over the next few months, NPR said.

Opponents of the new rates have warned that if they don't manage to broker a timely compromise with SoundExchange, the variety of independent Internet radio stations that consumers see today will diminish.

Back up for a second. How much are these rates going up, anyway?
The breakdown is as follows: The decision set rates for 2006 at 0.08 cents per song, per listener, which means Webcasters will have to cough up the difference between what they've already paid and what they owe under the CRB ruling. Then the rates climb to 0.11 cents in 2007, 0.14 cents in 2008, 0.18 cents in 2009 and 0.19 cents in 2010. There's also a $500 per "channel" minimum payment for each service.

CONTINUED: Flash from the past…
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20 comments

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Fairness
1) why should a regulator decide how much a radio should pay for playing your copyrighted song. Ok for now it may be hard to work with all the data but soon in the future it's concievable to have open copyright contracts that state how much per full listen, per consumer one would charge(with monitoring for extortion cases)
2) If i produce a peice of music and want it to be played on any computer/internet device when reccomended by a DJ why can't i label it free to air so that i don't get any royalties for it when played on the radio just when somone wants to purchase it.

Asking these questions and more my mind wanders down the murky path of the corrupt music industry and i wonder if any of it really wants individuals to prosper in the most influential art there is or whether music must conform to the propergander of the day/hidden islamic empire.
Posted by wildchild_plasma_gyro (296 comments )
Reply Link Flag
A very bad joke.
"A dollar and change is not too much to pay hardworking musicians,"

I hate to say this, but the "hardworking musicians", don't get the money. Most of it goes to the labels.

We need a system where 90% or more of the money goes to the artist, 10% or less goes to the parasites.
Posted by ralfthedog (1589 comments )
Link Flag
Not sure why they should be excluded?
I am not sure why the internet should be excluded from paying
these royalties? A broadcast is a broadcasts! It is obvious these
internet broadcasters want to make a profit on this.
I am not sure how many user's actually use a radio service?
I would say the only one's that should maybe get a beak would be
FM or HD radio stations which simulcast their station on the
internet. Copy right material is just that! No matter where or how
you listen to it!
Posted by jesmac418 (35 comments )
Reply Link Flag
Rate
They shouldn't be excluded, but the rates seem way off to me. They were talking about eventually going up to 18 cents per song per listener? That seems crazy to me. How does this compare to what FM radio pays? I don't think it should be any different.
Posted by wangbang (155 comments )
Link Flag
Not sure why they should be excluded?
You are absolutely right my friend! Let the Payola begin! When can Net Radio stations expect to begin receiving payments from the RIAA? I mean, if that's the way it works for broadcast, it should work that way for the net, right? Copyright is copy right, what's good for the goose is good for the gander, don't swim for 30 minutes after eating, don't take candy from strangers....

It's like the United States I grew up in moved to Mars, and left me in the middle of Moronistan.
Posted by dick_cheney_before (5 comments )
Link Flag
Does AM & FM currently pay royalty fees?
Years ago I worked at a college radio station and to my knowledge we never paid royalty fees on any music that was played over the air. In fact, there was a big scandal about "Payola" which was the record company reps bribing the disc jockeys with money, drugs or free vacations in order to get their records played more often on the air. This illicit form of free advertising caused a big stink in the 60's. My question: does commercial AM or FM radio pay royalty fees on the music they play. If they don't, then why should them manner of broadcast (i.e. webcasting) matter to anyone?
Posted by retiredtech (1 comment )
Reply Link Flag
re: Does AM & FM currently pay royalty fees? NO
NO, broadcast radio does not pay royalties.
<a class="jive-link-external" href="http://archive.salon.com/ent/feature/2001/03/14/payola/" target="_newWindow">http://archive.salon.com/ent/feature/2001/03/14/payola/</a>
<a class="jive-link-external" href="http://archive.salon.com/ent/music/feature/2001/07/24/urban_radio/" target="_newWindow">http://archive.salon.com/ent/music/feature/2001/07/24/urban_radio/</a>
<a class="jive-link-external" href="http://archive.salon.com/ent/feature/2001/04/30/clear_channel/index.html" target="_newWindow">http://archive.salon.com/ent/feature/2001/04/30/clear_channel/index.html</a>

This is why radio sucks so much. But it is all regulated by the Federal Gubermint - making usre that you here everything they want you to hear, and are paid handsomely for it. I can't find the quote where Jack Valenti - a man known widely for his grossly off-mark predictions as the head of the RIAA - laments that they can't get radio to pay royalties.

Here's something informative written by an expert in the field:
<a class="jive-link-external" href="http://www.legalaffairs.org/issues/July-August-2003/feature_zittrain_julaug03.msp" target="_newWindow">http://www.legalaffairs.org/issues/July-August-2003/feature_zittrain_julaug03.msp</a>
Posted by dick_cheney_before (5 comments )
Link Flag
recording of digitized music
I guess it might be free for AM &#38; FM radio since there's quality loss if someone tries to record the music. But I think the situation is different with Webcasters since they're playing digitized music which could be easier to record and there's no quality loss in this case. This might be one good reason for the music companies to ask for royalty (in compensation for piracy)
Posted by dndk82 (12 comments )
Reply Link Flag
Re: recording of digitized music
Look, here's the biggest problem: too many stupid people who don't know the first thing about an issue commenting vacuously. Yes, analog broadcast does incur a loss of quality. But done properly, it can be better than a commercial tape. However, not only do Commercial broadcasters NOT pay for music, they are PAID by the likes of the RIAA to promote their latest top-40 rubbish. First there was the direct money Payola scandal, then they fixed that problem by going through "independent" music promoters that took a cut off the top. The consolidation of large national broadcasters like "ClearChannel" turned this into a big money generator when they decided to go through a single "indie" (not to be confused with "indie artists"). Learn how to read and think before piping up.

Secondly, the RIAA would love to turn the tables on wireless broadcast so they can get PAID, but they realize it is impractical now because it's too late, and the broadcasters have enough money to wrestle the RIAA to the mat. However, Net Radio is still nascent and the RIAA smells money in the water - they and their bought-and-paid Congress parasites want (a) all the money they can get or short of that (b) kill off net radio because if they can't have it, no one can have it. Many people believe that the current neo-con/fascist regime is all about control: it is easier to control several mega-broadcast operations than hundreds of little ones. "You sure got a nice network of stations there, it would be a shame if you lost your license..." If only "big players" can operate in net radio, so much the better. They certainly don't want thousands of individuals setting up their own stations, playing music they like and saying what they think because, who knows, then the government couldn't control it all, now could they? It might even drive their controlled media sources out of business - or make them less profitable so they fracture back into small, less manageable franchises.

Finally, who told you digital == perfect? Are you a moron or do you just play one on TV? Net radio is compressed down to 64Kbps or 128Kbps for a good one. Perhaps you have a tin ear or a really terrible lo-fi stereo at home, but for me and most of my friends, 64Kbps ain't cutting it for quality. It makes no difference if I can copy it a billion times - it still sucks. I rip all my CDs (and I have thousands, mainly bought used) and compress them losslessly with FLAC. I run a DAAPD server to stream through out my house, as I am entitled to by the Fair Use provisions of the Copyright Act. Digital does not imply "no fair use". Much as the RIAA parasites would like to charge me per use, per room, per day, it doesn't work that way. They are old-think dinosaurs trying to do as much damage as they can in the new mammal world before they die.

Learn about an issue before opening your mouth.
Posted by dick_cheney_before (5 comments )
Link Flag
To Broadcast...or NOT to Broadcast (a repost)
One of the things that strikes me as odd is the fact that...streaming audio is a product of innovation of the internet. That 'innovation,' as we can see, is becoming stifled as more and more non-technological businesses (read: SoundExchange, internet marketers, Pfizer) try to take control of it and make the rules of what you can and can't do with it.

It's a sad period for the history of the internet when it used to be full of research, development, meaningful communications, and overall common sense.

Nowadays it's just a giant 'rent me' or 'buy me' space for zillions of billboards and I think I can liken this to any highway going into Las Vegas - the desert used to be a beautiful place until Wayne Newton and Carrot Top started popping up along the way.

Back to the topic at hand: SoundExchange has zero authority as far as I'm concerned to try and collect fees from public radio stations that do not broadcast any copyrighted material, even anything that is allowed by the original copyright holder. If I make an audio file that I want to post for free use on the internet, as long as the broadcaster is in agreement to cite the source, I have no problem letting it go. I don't want/require/need/desire SoundExchange going after money I'll never see.

That's like me trying to sell fruit on a public street corner and a guy in a silk suit telling me I need to pay a 'tax' to him and his boss or I risk losing more than just my business.

There are a few words to describe what is happening and they all imply organized crime mentality:

- Extortion.
- Racket.
- Blackmail.
- Swindle.
- Theft.
- Strong arm.
- Bleed.
- Intimidate.
- Muscle.

The sad part of this is that the United States Government, who is supposed to be for the people, by the people, is turning a blind eye to the people who just want to exercise their first amendment rights in the most inexpensive means possible.

If that's the case, then I want Hugo Chavez for president. At least you know where he stands.
Posted by `WarpKat (275 comments )
Reply Link Flag
Don't Listen, Don't Buy
The solution is to fight back against the tyranny of the "Big Five" music conglomerates - Universal, EMI, BMG, Warner and Sony. They are the masters of the RIAA, the scumbags behind DRM, the rootkit, and the bribers of Congress that has made a mess of copyright law.
These companies have colluded repeatedly in price fixing, artist contract abuse, and illegal payola to promote sales.
Do not buy music from these parasitical entities!
Rejoice as each year their sales and profits slip and we can look forward to their demise. The times have changed and their existence is akin to buggy whip makers.
There is plenty of compelling music offered by independent labels and artists. The Big Five give you manufactured boy bands, bimbo faux pop divas, mindless rap and hip hop prattle, and aging dinosaur wrinkly rockers.
If the confiscatory increase in royalty payments results in internet stations shutting down there will still be those that play music that is not part of the copyright payment scam. Let the idiots shoot themselves in the foot yet again! If they insist on extorting payments from stations to advertise their music then refuse to play or purchase any of it! Let the power fall!
Posted by zanzzz (138 comments )
Reply Link Flag
Used to be per hour?
According to <a class="jive-link-external" href="http://www.soundexchange.com/licensee/licensee_cws.html," target="_newWindow">http://www.soundexchange.com/licensee/licensee_cws.html,</a> the fee used to be 0.76 cents per *hour* per listener, although per performance was an option. Per hour seems much cheaper, so it would be a price increase of much more than 5%. Did I miss something?
Posted by AySz88 (44 comments )
Reply Link Flag
Extraneous comma
Sorry, that link should have been without the comma: <a class="jive-link-external" href="http://www.soundexchange.com/licensee/licensee_cws.html" target="_newWindow">http://www.soundexchange.com/licensee/licensee_cws.html</a>
Posted by AySz88 (44 comments )
Link Flag
Let net radio opt out.
Why not let artists have the choice of opting out of SoundExchange. If an independent band wants to let their songs be played on internet radio for free, let them.

Let net radio stations choose to play all independent music, or be part of SoundExchange. I think this free market solution would soon remove SoundExchange and the RIAA from relevance.
Posted by ralfthedog (1589 comments )
Reply Link Flag
If the fees stand most net radio will be DEAD
OUTRAGIOUS FEES that would force net radio broadcasters to
pay up to millions would kill net radio. They are killing some of
the best and most outreaching type of marketing for the artists
music. Were talking global. Far better than any FM station could
reach out to anyone. So now this is it. Unless Congress gets off
there ASS and stops this GREEDY non-sense net radio will be
dead and the only ones that will lose out is the artists that they
claim are supposed to be paid. Well now they will get NOTHING!
Because no broadcasters will be found as no one can AFFORD IT!
So now they will lose two ways, no money and no GLOBAL
advertising. I see nothing good coming out of this except the
death of internet radio.
Posted by jhorvatic (18 comments )
Reply Link Flag
 

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