From the L.A. Times: "With CD sales tumbling, record companies and musicians are looking at a new potential pot of money: royalties from broadcast radio stations.

"For years, stations have paid royalties to composers and publishers when they played their songs. But they enjoy a federal exemption when paying the performers and record labels because, they argue, the airplay sells music.

"Now, the Recording Industry Assn. of America and several artists' groups are getting ready to push Congress to repeal the exemption, a move that could generate hundreds of millions of dollars annually in new royalties...

"The decision to take on the volatile performance royalty issue again highlights the rough times the music industry is facing as listeners abandon compact discs for digital downloads, often listening to music shared with friends or obtained from file-sharing sites.

"'The creation of music is suffering because of declining sales,' said RIAA Chief Executive Mitch Bainwol (pictured right)...

"It's not the first attempt to kill the exemption. In the past, politically powerful broadcasters beat back those efforts.

"But with satellite and Internet radio forced to pay 'public performance royalties' and Web broadcasters up in arms about a recent federal decision to boost their performance royalty rate, the record companies and musicians have a strong hand...

"For record labels and musicians, addressing the issue now is crucial because digital radio, now being rolled out, allows broadcasters to split a signal into several digital channels and play even more music exempt from performance royalties...

"The U.S. Copyright Office has long supported removing the exemption.

"The groups have a major ally in Rep. Howard L. Berman (D-CA), who now chairs the House subcommittee dealing with intellectual property law. Berman is 'actively contemplating' leading a legislative push to end the exemption.

"'Given the many different ways to promote music now that didn't exist as effectively when this original exemption was made,' he said, 'the logic of that I think is more dubious.'"

Read the entire article at the L.A. Times.

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x First, Berman is being disingenuous — we are not talking about an "exemption" from copyright, we are talking about an "expansion" of copyright! "Satellite radio, Internet broadcasters and cable television companies offering digital music channels now pay performance royalties. The recording industry and musician groups say it's time for traditional radio stations to pony up.'" Wait a minute! This is like the boy who murders his parents and then asks the court for leniency because he's an orphan! "'Most of the artists in the world are kind of middle-class cats, trying to piece together a living,' said Jonatha Brooke, a singer-songwriter who is part of the Recording Artists Coalition advocacy group. 'It's important to be recognized and paid for our work.'" Hold on a minute! Most of the recording artists in the world don't get any radio airplay at all — they won't see any payments from this! Mariah Carey would see some cash, but Jonatha Brooke's fellow middle-class cats wouldn't! -- KH x

x Could new RIAA royalty destroy the radio industry? What would happen to the terrestrial radio industry if it had to pay a performance royalty similar to the CRB rate for 2007 that webcasters are currently faced with? The math is actually pretty simple: Radio is a $20 billion business. Of America's 250 million 12+ population, at the average moment (Mon-Sun 6AM-Mid), about 14% of the population is listening to the radio. So, 250 mil x .14 = 35 million radio AQH (i.e., average audience). Let's assume about 67% of that listening is to music-based radio stations, playing about 12 songs per hour, 18 hours per day (6AM-Mid), 365 days per year, plus an extra 10% to account for songs played overnight (Mid-6AM). 35 million x .67 x 12 x 18 x 365 x 1.10 = 2,033,677,800,000 song performances per year. (Important note: Every one of those over 2 trillion song performances is a 3-minute-long promotion for buying it (assuming it's made available and priced reasonably by the label).) Multiply the 2007 CRB rate of $.0011 per performance by a bit over 2 trillion performances, and you get $2,237,045,580. Divide that figure by industry revenues of $20 billion, and you learn that this payment would comprise 11.2% of total industry revenues. What does that do the radio industry? It destroys the entire profitability of the industry! Going alphabetically through some publicly-traded companies: Beasley has about a 8% profit margin; Citadel, negative; Clear Channel, 10%; Cox Radio, 13%; Cumulus; negative; Emmis, negative; Entercom, 9%; RadioOne, 14%; Saga, 9%; Salem, 9%... On average, it appears that the industry average is less than 11.2%.. A CRB-like royalty rate would DESTROY the radio industry, by eating up more than 100% of the entire industry's profits! (BTW, it gets worse later in this decade; the CRB rate goes up to $.0019 per performance, which, assuming radio's AQH and revenues stay about constant, would equate to about 19.3% of industry revenues.) Does anyone truly think that the lack of a broadcast performance royalty is what's preventing Mary from going into the studio and making new art? That's the actual supposed intent of copyright law — to encourage innovation and creation of new work! -- KH From Kurt's "Radio and Music: A New Blog". For a more-detailed version of this analysis, see the blog here x

From the Washington Post: "This weekend, Live 365 chief executive Mark Lam is gearing up for his second trip to Washington in a month. For 2 1/2 days, Lam will be talking nonstop to congressional staffs in an attempt to drum up support for a bill that he's hoping will help keep his company afloat — and keep thousands of independent Internet music stations online in the process...

"[Proposed performance royalty] rate increases mean that Live365 would owe $7 million to $8 million this year in fees, compared with $1.4 million last year, Lam said. 'We don't have the money to pay up,' he said.

"SoundExchange's executive director, John Simson, said the increased royalty fees are important to a music industry looking for new revenue in a world where compact disc sales are quickly evaporating.

"Simson disputes the assertion that the new fees will have a destructive impact on the diversity of music available from Web-based broadcasters.Over the past three years, the online audience listening to Internet radio stations has doubled, he said...

"'We're a young industry,' said Tim Westergren, co-founder of the online radio service Pandora. 'We don't have any legacy on Capitol Hill. We don't have any deep lobbying contacts the way the recording industry does... this is the first time I'd ever called my own congressperson.'

"Initially, he said he was 'despondent' about the future of his company. Now, after a few weeks of lobbying, he says he is feeling optimistic that the new fees might be overturned. It doesn't hurt that many of the young Hill staffers who work in congressional offices tend to be tech-savvy music fans who are familiar with his company's service...

"'It's always hard to pass legislation,' said Jonathan Potter, [DiMA's] executive director. But, he said, 'we've gone from one sponsor to 82 sponsors [in the House] in two weeks. The energy around this issue is everywhere.'"

Read the entire article at the Washington Post.

From USA Today: "When CEO Eric Schmidt (pictured center) joined Google from Novell in 2001, it was an unprofitable but up-and-coming search engine.

"Now, Google has... made an alliance with the nation's largest radio broadcaster, Clear Channel, to let Google advertisers buy radio ads directly from the Web.

"USA TODAY's Jefferson Graham sat down with Schmidt to discuss the new directions and perceptions that Google is now unstoppable. These are edited excerpts:

"Q: You say this will be a 'breakout' year for Google and radio. Why?

"A: Radio is greatly undermonetized. Look at the time people spend listening to radio, vs. the money currently being spent to advertise on radio — it's out of whack. Radio can be so much bigger.

"Q: Why do you think your network of advertisers, who specialize in online text ads, are ready to move to audio advertising?

"A: We have enough inventory. We got into radio when we bought dMarc Broadcasting, but they had remnants... That's a good business, but not a great business. What we needed was prime-time slots, and that's what Clear Channel offers us.

"Q: How will this work for your clients?

"A: You're already advertising on the Web, so why don't you try a radio ad? And you will discover there's a whole network of people, at the click of a button, who can professionally produce the ad for you, for like $100. It's unbelievable...

"Q: The beauty of the online advertising model is that advertisers know whether or not an ad has been effective. They only have to pay if someone clicks on the ad. How can you bring relevancy to radio?

"A: Advertisers can target the listener by driving them to a toll-free number or website address, and that should produce an uptick in the product demands."

Read the entire article at USA Today.