In light of recent news, we're re-focusing the agenda for our annual RAIN Las Vegas Summit, which will be held all day on Monday, April 16th at the Renaissance Hotel in Las Vegas. More details are coming, but in the meantime, scheduling and location information is here. Please plan on joining us if you can!

Here are some highlights from an interview in this month's RoyaltyWeek conducted by Brian Zisk, Co-founder and Technologies Director of the Future of Music Coalition, with John Simson, Executive Director of SoundExchange.

Below is Part 1 of the interview, dealing with litigation leading up the CRB and the promotional value of webcasted music, among other topics:

"Brian Zisk (pictured): As you know the CRB came back with rates which some folks think are too high. From what I’ve read you don’t believe this to be the case. Can you please explain your view?

John Simson: ...[F]or example, that a number of webcasters, more than a handful, were selling six audio ads per hour; Kurt [Hanson] used two in his example, but six would bring higher revenue. I know that video pre-rolls are starting to be used, with a much higher CPM, some­where in the $20 CPM range.

But there’s really a disconnect perhaps between where people see revenue going, and where the judges obviously saw  it going. If you read the opinion it was very deliberative; I think they spent a lot of time going through the evidence...

Percentage of revenue and direct licensing
BZ: I think that everybody asked for a percentage of revenue. Is that a big surprise that when everyone asked for it the CRB rejected this option?

JS: (pictured below) Interestingly I think there was testimony from SBR Creative Media that was cited by the judges where they said, 'Well we’d like a percentage but if you set the per play rate really, really low we could live with the per play rate too.' And so in that regard what they were basically saying is that regardless of what the market rate should be, if you set it really low we’ll live with that as opposed to a percentage of revenue. I think that perhaps if the small webcaster’s case would have been that they had to have a percentage of revenue rate, no per play rate at all, there may have been a different outcome...

The judges looked at all the marketplace evidence, that this is a very explosive market place right not in transition but with lots of revenue coming in. One thing I have to say for the small webcasters — after the first [proceeding] they went to Congress [which] gave them concessions based on policy grounds. Certainly it wasn’t on free market grounds...

Now that there was this new proceeding or this new process, this new Copyright Royalty Reform, rather than just say, "Hey we got this mandated deal through Congress the last time and let’s just push it forward, or let’s just tinker with it a little bit but keep it pretty much the same," that’s not what they said. They wanted to cut rates by two-thirds. So I think there was a lot of greed on their part.

BZ: Clearly the folks who have to pay want to pay the lowest rate and the folks who want to get paid want to get paid the most... Now you referred back to the CARP... In the end a negotiated agreement was reached for at least some classes of webcasters. Do you foresee the possibility of that happening again in this case?

JS:... [T]hey always have the outlet of going in direct licensing.  Obviously the transaction costs are higher, and It’s not as easy as a statutory license... If you go to the Copyright owner and say I need a better rate to play your music; these rates don’t work for my kind of service, then it’s up to an individual Copyright Owner...

Does Internet radio help artists?
BZ:... [I]n essence, if webcasters bypassed the Statutory License by licensing directly, most artists would get nothing. So is it in SoundExchange’s best interests to maximize payments to the labels, or to grow the industry under the statutory webcast licensing thus maximizing payments to artists?

JS: ...I’m tired of the claims that have been made over and over, a sort of arrogance on the webcasters side that we’re doing you a favor playing your music. And it’s like no, you’re not doing them a favor; you’re playing it because you either love it or because you think it helps you gain an audience and it serves your purposes. That’s why you’re playing music. Whether it’s promotional or not — and frankly I think in this proceeding just like in the prior proceeding the judge said you know we’ve seen very little evidence other than what we consider puffing that webcasting is really promotional...

Here’s a good example: Certainly I’ve been listening to Satellite Radio and I hear some really cool things there that I learn about. Do I run out and buy them? No. Maybe ultimately there’s a purchasing decision but typically is it 1 out of 100 cases? One out of 1,000 cases? It’s hard to quantify.

BZ: That’s an interesting perspective because Internet radio stations are required to list what song is being played, what artist is being played, they often provide a direct link to buy the CDs.

JS: If the evidence had been there that a huge percentage of people hit those buy buttons and buy CDs, but this evidence was not presented.

BZ: But the history of music is that the labels have consistently paid terrestrial radio stations for promotion. So since we’re in agreement that there’s even better promotion through internet radio is it more a fact that the case wasn’t presented properly? Why wasn’t the better promotional value than what the labels have traditionally paid for reflected?

JS: I think the whole promotion argument is really a red herring and it gets people off the value proposition which is you’re using music to build a business; you should pay for it...

And frankly what I’ve seen more and more is there have been studies that show over the air radio may not be promotional at all; it may be more substitutional. So that’s why I say I think it’s an argument for me that’s a non-starter. We should get away from that argument and I think we should recognize that we can both benefit as long as we respect each other and say, you know, 'Yeah, they need to be paid fairly when we use their stuff.'"

Part 2 of Brian Zisk's interview with John Simson will run in tomorrow's issue of RAIN. In the meantime, you can find the whole interview here [.pdf].

From yesterday's Wall Street Journal: "In a dramatic acceleration of the seven-year sales decline that has battered the music industry, compact-disc sales for the first three months of this year plunged 20% from a year earlier, the latest sign of the seismic shift in the way consumers acquire music...

"The slide stems from the confluence of long-simmering factors that are now feeding off each other, including the demise of specialty music retailers like longtime music mecca Tower Records. About 800 music stores, including Tower's 89 locations, closed in 2006 alone...

"Jeff Rabhan, who manages artists and music producers including Jermaine Dupri, Kelis and Elliott Yamin, says CDs have become little more than advertisements for more-lucrative goods like concert tickets and T-shirts. 'Sales are so down and so off that, as a manager, I look at a CD as part of the marketing of an artist, more than as an income stream,' says Mr. Rabhan. 'It's the vehicle that drives the tour, the merchandise, building the brand, and that's it. There's no money,'...

"In recent weeks, the music industry has posted some of the weakest sales it has ever recorded. This year has already seen the two lowest-selling No. 1 albums since Nielsen SoundScan, which  tracks music sales, was launched in 1991...

"Adding to the music industry's misery, CD prices have fallen amid pressure for cheaper prices from  big-box retailers like Wal-Mart and others. That pressure is feeding through to record labels' bottom lines...

"Perhaps the biggest factor in the latest chapter of the music industry's struggle is the shakeout among music retailers... [R]etailers like Wal-Mart Stores Inc. and Best Buy Co... represent about 65% of the retail market, up from 20% a decade ago, music-distribution executives estimate...

"Joe Nardone Jr., who owns the independent 10-store Gallery of Sound chain in Pennsylvania, says he is trying to make up for declining sales of new music by emphasizing used CDs, which he calls 'a more consistent business,'...

"Retailers and others say record labels have failed to deliver big sellers. And even the hits aren't what they used to be...

"Even when you have a good release like Norah Jones, maybe the environment is so bad you can't turn it around,' says Richard Greenfield, an analyst at Pali Research."

Read the entire article at the Wall Street Journal.

"While still in its infancy, the number of consumers using their mobile phones to listen to music (streaming / native to the device) is projected to grow 34% by the end of 2007... Approximately 50% seek music or listen to Internet radio [see chart above]...

"The more time spent using wireless technology to access the Internet, the less time spent with traditional AM/FM radio [see chart at right]...

"While some of the research conducted at Bridge Ratings reflects that for the general public some of the lost listening to AM/FM is recaptured through Internet radio listening to simulcast, among this group of wireless Internet users, the recapture component is considerably lower when compared to their listening to streaming music or non-terrestrial simulcast Internet radio.

"This study was commissioned by a firm interested in confirming wireless Internet use among listeners to traditional radio."

The above, including the charts, is excerpted from the Bridge Ratings press release found here.