From the Wall Street Journal: "Is Internet radio in trouble?

"Last week the Copyright Royalty Board released a ruling proposing new performance royalty rates for online radio stations...

"Net-radio operators have sounded the alarm. Kurt Hanson, founder of online radio company AccuRadio, told my print colleague (read RAIN coverage here) Sarah McBride that he estimated the new rules would raise Accuradio's royalty payments to about $600,000 — more than Accuradio's 2006 revenue — from about $50,000...

"Net-radio fans are angry, but they shouldn't be too hasty in blasting the Copyright Royalty Board. The real problem is a pair of misguided decisions made by Congress in the 1990s.

"...The Digital Millennium Copyright Act of 1998, building on 1995's Digital Performance Rights in Sounds Recordings Act, said Net-radio firms had to pay performance royalties on songs played in addition to composer royalties on those songs. Terrestrial radio stations pay composer royalties, but they don't pay performance royalties, under the long-established rationale that record labels benefit from the promotional value of songs played on the radio.

"So if a Clear Channel radio station plays that new Fergie song over the air, it doesn't pay a performance royalty — but if it streams Fergie over the Net (or satellite radio), it does. Make sense to you?

"Of course not — because that makes no sense whatsoever... For the recording industry's disingenuous analysis of the law governing radio and royalties, read our 2002 Real Time, which preserves part of a Recording Industry Association of America FAQ that's been taken down. (The recording industry maintains that Net-radio operators aren't in danger of going under this time either, thanks to steadily increasing advertising revenues.)

"All this aside, I've become a fan of Pandora since writing about it here, and perhaps my recent experience with the service will serve as a warning to the recording industry of what  it could be losing...

"Last week I went through my Pandora profile to see all the songs I'd given a thumbs-up to since last summer,... then I went over to eMusic and iTunes and bought 13 songs by 12 bands — none of which I'd heard of before finding them on Pandora...

"To me, that virtuous circle sure sounds like the old 'radio is free promotion' bargain underlying traditional radio — for which performance royalties have never been paid in the U.S. Yes, there are technological differences between terrestrial radio and Net radio, notably the ability to guide what's played, skip songs and keep track of what I like. But those differences seem to work to the advantage of artists and record labels.

"With Net radio, I'm more likely to hear songs I like, bookmark them and buy them. One listener's experiences aren't necessarily grounds for extrapolation, but this bargain seems like a pretty good deal for the recording industry, one it ought to be careful about altering."

Read the entire article (subscription required) at the Wall Street Journal Online.

"It seems too out of line to have been anyone's serious effort at a solution..."

My heart sank as I read the new rates earlier in the week and began the
computations, which resulted in outright depression as it became painfully obvious
that this was much more than just a nuisance. More a whack on the head with a
baseball bat.

We have to find a way to turn this ruling around, as it seems too out of line to
have been anyone's serious effort at a solution.

We at American Media Services Internet (AMSi) in Charleston have sent a letter with
supporting material to Congressman Henry Brown, who represents our area, asking him to join with those on Capitol Hill who are already speaking out on our behalf. We are planning other contacts as time permits in our effort to derail this CRB crisis.

Your publication is doing a great job of tracking this situation.

"Could an indepenent artist offer licensing for a monthly or yearly fee?.."

Could an independent artist like myself with a large music catalog that is copyrighted offer licensing to internet broadcasters for a monthly or yearly fee? Is that is legal?

Let's say I authorized the use of my catalog for a flat fee of $15 dollars per month. That $15 dollars would pay for the unlimited use of 100 songs from within my catalog. This catlog contains a variety of artists and styles. Furthermore, the price would decrease drastically with the purchase of addtional songs or with a yearly contract. For example, 150 songs for $17 or 200 for $20 dollars and so on.

The new royalty rate is unfair. I support independent internet broadcasters and respect the large amounts of work they put in to their stations. At the same time I understand that recording artists need to make money for their work.

Having worked in radio I know that quality product is key. With that in mind I know many independent artists with fantastic catlogs who would be willing to do the same. Would this pose a solution?

"The only eventual winner from this scenario is terrestrial radio..."

I had hoped to see a new internet radio royalty structure much more refined and
forward-looking than the old one. That is, one designed to maximize the revenues to
those who collect and benefit from them, while encouraging growth in internet radio,
without imposing undue hardship or ruin on it. Here, it appears the new rate
structure is anything but; it is harsh and punishing to internet radio.

The only eventual winner I can picture emerging from this scenario is terrestrial radio, which may view internet radio as a future challenger to its market dominance.

Bandwidth costs have been dropping, and terrestrial radio may be anticipating a day, not far off, when higher-bitrate streaming by listener-sensitive internet stations could pose a meaningful challenge to their supremacy. In the end, what could be better for them than an internet royalty structure that strangles internet radio in its infancy, ridding them of this troublesome pest before it becomes a threat?

"My show has changed format to cover the CRB rate hikes..."

I run the stations SoulsVilleOnline, YourOldiesRadio, and JazzVilleOnline.com. All these broadcasts run under the Small Webcasters Settlement Act. I do a weekly show on LG73, a Canadian-based Internet radio station.

My show has changed format to cover the CRB rate hikes; we're taking calls via Skype, and would like to get the word out about the twice weekly program which now
has become a "Fight the CRB Ruling" show. We plan on doing at least 1 or 2 weekly programs till this issue is resolved.

"Webcasters provide a lot of free advertising for the musicians..."

I am sure this decision had nothing to do with the artists who make the music. I am
a subscriber to Pandora and I can tell you that I get to hear music that I would never hear if it wasn't for this service.

It seems to me that webcasters provide a lot of free advertising for the musicians. It would be a travesty if these companies are driven out of business.

"You can't keep manipulating Congress' lack of understanding..."

One could argue that every single time the record industry attacked technology with "our sales will be destroyed because of this technology," it was no thanks to them that the TECHNOLOGY created secondary markets and more which gave them TRILLIONS of dollars in revenue and hundreds of thousands of new jobs.

Once again, they're going to have to be forced to get out of their own way so TECHNOLOGY can help bail them out of their small-minded ways of thinking and bad management. After all, they could've worked on an iTunes-kind of system, and they didn't. They wasted time with comments and court cases, with people like Mr. Simson at the forefront spewing such skewered information and they forgot that the truth is the only thing that can set them free.

You can't keep manipulating Congress' lack of understanding of an industry forever... can you?

"I don't see why the (BMI, etc.) formula can't be instituted for webcasters..."

I don't see why the same formula that for decades has worked for BMI, ASCAP & SESAC can't be instituted for webcasting royalty rates. That is, webcasters could pay
simple (but reasonable) percentage of revenue collected and distributed by SoundExchange, instead of a charging on a per song/per listener basis.

"A significant net loss to the recording industry..."

I recently began listening to Pandora. I hate commercial radio and haven't listened
to a single minute of it in close to a decade. In only a few days of listening, Pandora introduced me to several artists I like that I had never heard of before. Commercial radio hasn't done that for me since I lived in a college town in the mid-1980s.

I went out a couple of weeks ago and bought 10 albums based on my Pandora listening.

Rather than trying to milk internet radio stations dry or kill them altogether, the
recording industry should recognize them for what they are -- a partner in promoting
artists and a vital contributor to recording industry revenue.

Without internet radio I will find fewer new artists that I like and that will translate to less records purchased on an annual basis. I can't be the only person for whom that is true.

Couple that with the revenue lost from all of the internet radio stations that will
go out of business and it would seem to be a significant net loss for the recording
industry. Wonder if they are bright enough to figure that out?

"Use the power of Congress to develop a workable fee structure..."

All well and good to do the listener petitions but really — go to the source of
power — your Congressional  Represenative.

Have the facts in hand, call his local office and schedule a "sit down" meeting. Be reasonable and polite. Explain how this proposed ruling will do the very opposite of diversity that they all profess to support.

Use the power of Congress to develop a long term workable fee structure.

"Perhaps record companies intend to fund their payola..."

Snarky thought for the day: Perhaps the record companies intended to fund their
payola to terrestrial radio stations with the royalties extorted from the Webcasters.

"Internet radio has been a godsend for indie artists!.."

As an independent artist (Willie T & Doctor X), I rely almost entirely on Internet Radio to bring my music to the world. Thanks to webcasters my music has reached listeners all over the planet — something I never dreamed would be possible.

Commercial radio is largely shut off to musicians like me, who can't afford — or
refuse to fork over — huge sums in payola.

Internet Radio has been a godsend for Indie artists!

Would I like to receive royalties for my work? Of course I would. But the exorbitant rates proposed by the RIAA and approved by the CRB will bankrupt the very stations that give life to my music, and which spur CD sales and digital music downloads. I would much rather keep the rates low in order to keep these stations alive.

If the CRB's rates are allowed to stand there are hundreds of thousands of artists like me who will be thrust back into the dark ages where the best we could do is get limited airplay on local college radio stations.

I also believe that terrestrial broadcasters should not be exempt from paying royalties for the use of sound recordings. Why should webcasters have to bear this
burden alone?

"Services... need to have the same raw material cost structures to compete..."

Willing Buyer/Willing Seller cannot be determined in a vacuum with only Internet
webcasters and RIAA as participants. No way there will be willing buyers at rates
much above $0 when the established businesses on the other side of the street get
all their materials for free.

Internet webcasting as a legitimate business model doesn't stand a chance until the persons making these monumental royalty decisions understand that non-interactive services -- whether digital, analog, Internet or terrestrial -- are all vying for the same listeners and need to have the same raw material cost structures to compete.

Either all should pay nothing, or all should pay a reasonable percentage of revenue.

Perhaps webcasters need advocates who can creatively argue business law to
effectively wage this battle.

"Net radio is doing more for the sale of CDs than these people realize..."

Do these same record labels realize that internet radio is for listeners like me,
the major way that I am drawn to purchasing new CDs??

I listen to AccuRadio constantly through my work-week. AccuRadio allows me to click the CD label for the current song to go straight to Amazon where I can buy the CD. If hear a song that I like, I click on it to see more about the album. I hear more than one song that I like on an album and it goes on my wishlist or shopping cart at Amazon.

This is how I buy CDs! No more listening to FM radio and wishing I knew who had done a particular song because I either missed the announcement or they didn't say who it was. This may be just one example, but I bet that internet radio is doing more for the sale of CDs than these people realize.

"Gut the very people it claims to be protecting..."

Have the CRB or RIAA explained how cutting out hundreds or thousands of
small webcasters will serve their clients?

If the CRB establishes a moderate rate and maintains it, isn't there a
greater likelihood that the small and medium webcasters will stay in the
game? How much in royalties does that add up to? I speculate it's in the
millions.

And that's only in regard to royalties. As for exposure...I guarantee that
there aren't ANY terrestrials or satellite moguls who serve the niche
audience that hundreds of webcasters take care of and in so doing the many
performers, writers, arrangers and the rest of the performing pantheon
receive exposure they won't get anywhere else.

What's the real agenda?

An agency, purporting to be doing something that is more 'fair,' is about to gut the very people it claims to be protecting.

The RIAA cannot claim to be aligned with free markets, nor can it claim to
be protecting the artists of the recording and performing industry because
it is about to cut hundreds and thousands of throats.

"The more successful you are, the faster you'll fail..."

In the broadcast industry we pay for broadcast use (ASCAP, BMI), then for internet
use. Add AFTRA's announcer fees/prohibitions to the basic costs of streaming and it
doesn't make sense to do it.

The more successful you are the faster you'll fail. It's a strange business model
that's likely to backfire on content owners hoping to see new technologies using any
kind of licensed content.

"These laws always seem to hurt the independent artists the most..."

"Force all broadcasters to pay an equal and fair share..."

"Drop major label product..."

This is the same game with a different name (year) as had come before. The only
solution now, as then, is for Internet Radio to drop all major label product.

Terrestrial can't break a new band, Satellite is near bankrupt and has to merge to
survive, with only Internet Radio left to expose new artists.

Hit them where it hurts, drop major label product at once.