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Don't
lose access to RAIN!
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Because
we had problems renewing our domain name, you may have trouble
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. To make sure you can read RAIN today and tomorrow,
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(The back-up e-mail address for us is kurthanson@aol.com.)
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Thanks to all the fine companies
who were part of yesterday's "RAIN
Vendor Guide (Ver. 2.0)" issue. If
you didn't have a chance to spend time with it yesterday,
you can access the issue here.
Thanks!
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 BY
KURT HANSON
Although the Librarian of Congress may, in retrospect, have
made a badly mistaken royalty rate decision last week (see RAIN's
story on his decision here
and Mark Cuban's revelation here),
the seeds of the crisis were planted by
Congress in  October
1998 when, in the Digital Millennium Copyright Act (DMCA), Congress
set "willing buyer/willing seller" as the standard under
which the Librarian was to determine the appropriate rate.
It may have been a virtually-impossible
standard to follow. And the following analogy may explain
why.
The Yoshi analogy
Pictured below right is my cat, Yoshi.
He's ten years old and, because he's diabetic, he's not in great
shape, but we go back a long ways together and we have a relatively
good relationship  as
far as cat/human relationships go.
But let's imagine for a moment that I was compelled
to sell him to you — and for an unspecified price.
And let's further imagine that somehow a
third party was assigned to set the price based on "the
price that would have been negotiated in the marketplace between
a willing buyer and a willing seller."
That's a recipe for disaster!
The heart of the problem is that I'm
not a willing seller! To some extent it's a control issue,
to some extent it's because I have other plans for him, and to some
extent it's just a gut-level feeling that "He's mine,
dammit." Okay, maybe for, say, $5,000
I would sell him to you, but even then I'd want to know
he was going to a good home and I'd like some say over how you treat
him.
Meanwhile, as the potential buyer, you know that you can get
used cats for under $20.
(You've checked with animal shelters, you've checked classified
ads, you've looked at the price of used cats in other countries.)
You know $20 is a fair price for a used cat — and you know
you'll take good care of him, so you don't want me to retain rights
over how you'll treat him.
How in the WORLD could a third party apply the "willing
buyer/willing seller" standard in this instance? (Split the
difference and say the price for Yoshi shall be $2,510? Neither
side would be happy at that price.) The assignment seems impossible.
Record companies and webcasters
disagree on the value of the Yoshi involved
That's almost precisely the dilemma the CARP faced in trying
to determine a sound recordings performance royalty rate "that
would have been negotiated in the marketplace between a willing
buyer and a willing seller."
The sellers
essentially don't want to sell: First, the record
labels' lawyers are in charge
of the decision process (not their marketing and promotion executives,
who might have a  different
opinion, as they understand the promotion value of radio airplay).
They know, with some validity, that their music catalogs —
their Yoshis— are very valuable. Furthermore, they have their
own plans for them (e.g., PressPlay and MusicNet). And furthermore,
I imagine that the gut-level attitude "They're mine,
dammit" is in play here as well.
So their initial asking price ($.004/song) was the equivalent
at the time of about 1000% of
webcaster revenues. (Much like me wanting $5,000 for Yoshi.)
Meanwhile, on the other side of the table, the potential
buyers (webcasters) know that the promotional value of radio airplay
has historically been very, very good for the record industry. They
know the rates of composers' royalties, and they know the rates
of sound recordings performance royalties in other countries. They
know from all of these factors that 3% to 5% of revenues seems more
in the ballpark of what's "right."
End result: It's an impasse!
No wonder the CARP went through a convoluted decision process
and the Librarian of Congress had to struggle to come up with a
rate. Congress started it by
setting a standard that, in a brand-new industry, maybe just doesn't
work.
| Paul Maloney
adds: Remember
that the "WB/WS" standard was unique (I believe) to
this particular CARP. Other recent CARP's used different standards.
Rep. Zoe Lofgren (D-CA), in written testimony to the House subcommittee
hearing on the CARP process, said, "Currently there are
three separate rate-setting standards. One requires CARPs to
set rates based on fair return and a balancing of competitive
interests. Another requires royalties to reflect 'fair market'
value. A third for webcasting has no fairness requirement; instead
it requires royalties to reflect what a 'willing buyer' would
pay a 'willing seller.'" |
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BY PAUL MALONEY
According to an article in yesterday's Wall Street Journal,
Yahoo will shut down their Yahoo!
Radio aggregation of broadcast
radio station streams -- apparently in a cost-cutting measure. Yahoo!
will continue to operate its Internet-only Launchcast
service.
The Journal's source for this was Henry Sohn, vice
president and general manager of network services for Yahoo!. He
said, "We're trying to focus on things that are profitable
for the company or strategic to how we want to build the business
going forward." He reportedly stressed that Yahoo!'s decision
has nothing to do with the Librarian of Congress's determination
on webcasting royalty rates.
Sohn apparently told the paper that the company considered
changing the business model -- but decided to go ahead and eliminate
it. (For at least some stations, it was a barter deal in which streaming
services were traded for on-air ads). The Yahoo! Radio service is
scheduled to be shut down within the next two weeks.
Yahoo! parlayed $5.7
billion on the future of streaming radio with its stock
acquisition of Broadcast.com at the height of the dot-com mania.
It was from that acquisition that Yahoo! Radio was formed.
The paper also spoke to Susquehanna
Radio Corp. Senior VP/GM of group operations Dan
Halyburton, who reportedly
was told a few weeks ago that Yahoo would stop streaming his company's
21 stations by next month.
Halyburton inferred that this development, along with the
Librarian's royalty decision, may spell the end of streaming for
his company. He told the Journal, "Now Susquehanna
is looking at all of our various options to figure out how, or
whether, to keep its stations online." (These events)
"really cause us to pause and look hard at what the future
of this is."
The article from yesterday's Wall Street Journal is
online here
(subscription required).
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...
Note that the Yahoo!/RIAA deal discussed here on Monday
and Tuesday (see RAIN here
and here)
apparently expired at the end of 2001. Thus, Yahoo! would currently
be bound by the terms of the statutory license announced by
the Librarian of Congress last week (though Yahoo's Sohn claims
their decision had nothing to do with the determination).
Note also that Yahoo!'s bet on Internet radio
is now not with their $5 billion
acquisition of Broadcast.com but rather with their $12
million purchase of Launch.com. (The purchase price
of the latter acquisition was 1/4 of
1% of the purchase price of the former.)
(Okay, that's not quite a fair apples-to-apples comparison.
Broadcast.com provides the backend hosting and streaming services
for Launch.com and streams music videos, sporting events (NCAA,
NFL, NHL, etc.), corporate/business content, news, movie trailers,
etc.)
We're hearing lots of "helicopters and men in black"
stories which infer Yahoo! is "eliminating
their competition" for Launch by shutting down the broadcast
stations' streams. We don't know about that -- after all, the
idea of a company shutting down a money-losing division is really
nothing too suspect.
It'll be interesting to see whether the radio stations
that had previously been locked into their deal with Yahoo!
choose to take advantage of this development
to firmly establish their own brand identity on the
Internet. -- PM & KH
... |
| Since the
"Cuban bombshell" piece in RAIN on
Monday, a lot of RAIN readers wondered "Why
are we just hearing this now?" While the following,
excerpted from an article in Wired from nearly two years ago,
doesn't go into detail of the actual Yahoo! strategy, Cuban
did repeatedly warn webcasters as to how the RIAA might try
to squeeze them out. |
From Wired, September 29 2000: "'The RIAA is a cartel.'
"That's the warning Broadcast.com founder Mark
Cuban has for webcasters who want
to get into the music-streaming business.
"Through a series of e-mail interviews, Cuban laid
out the strategy that the recording industry has used in its attempt
to negotiate licensing deals with various webcasters -- deals that
he claims will put any for-profit webcasters out
of business...
"Those who are negotiating are getting two deals, Cuban
said: Either pay the RIAA a percentage
of revenues or get charged one-third
of a penny to one-half of a penny per song.
"That's bad news for companies hoping to turn a profit.
"'You can't do both, because companies couldn't
compete fairly if they did,' Cuban wrote. 'Companies
which were more "labors of love" and didn't try for revenues
would have a huge advantage. No revenues, no expense to the RIAA.
"'On the other hand, a per-song cost of one-half penny
per song is outrageous if you translate it to a CPM
cost. Eighteen songs
per hour, one-half (penny) per song equals 9 cents per hour, or
a $90 CPM cost to the RIAA. Awful tough to make money that way and
the RIAA knows it. How does a for-profit company with revenues compete
with one without?'
"It can't.
"The million-dollar question, then, is why Yahoo
-- which now owns Broadcast.com, although Cuban is no longer part
of the team -- would ink a licensing deal with the recording industry?
"One possible answer is that Yahoo could become
a part of the music industry through a merger or acquisition,
so that ultimately it would be affected by the royalty rate...
"More likely though, is that Yahoo simply
got a better rate than other, smaller webcasters like
On-the-I.com, which
agreed to fork over nearly 30 percent of the company's revenue to
the RIAA."
Read this entire Wired article from September 2000 here.
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From a Christian Pirate Network press release: "Christian
Pirate Radio...launches the CPR
Internetwork with 13 stations  signed
on, each gaining ownership of their own piece of the Internet radio
pie with a simple slice into the well-constructed CPR programming
system.
"Without any upfront investment, CPR Internetwork 'subscriber'
stations have their own personalized seven-channel
web music station as a value-added to advertisers and
an added attraction to
listeners.
"Listeners connect either directly via a URL that incorporates
the station's call letters or through the station's existing Web
site...
"Inaugural CPR Internetwork stations are KKLA-FM
Los Angeles; WYLL-AM and
WZFS-AM, Chicago;
WZZD-AM, Philadelphia;
KKHT-AM, Houston; KRKS-FM,
Denver; WFMH-FM, Cleveland; KGNW-FM,
Seattle; KPRZ-AM, San
Diego; WTRU-AM, Winston-Salem;
WRFD-AM, Columbus; KAIM-FM,
Honolulu, and KDAR-FM,
Oxnard...
"CPR offers seven distinctive channels, with music and
programming for every member of the family. The channels
are:
* CPR "Original," playing the best in modern Christian
music.
* CPRXtreme, an active rock experience providing a unique mix
of energetic Christian music specifically targeting the interests
of Christian youth.
 *
CPRCelebration is praise and worship music designed for Christians
wanting to continue their Sunday morning worship experience throughout
the week.
* CPRKids, featuring exciting drama and teaching programs
plus the best in children's worship and contemporary music.
* CPRClassics, playing Christian hits from the 70's, 80's
and 90's.
* CPRGospel, offering contemporary urban gospel music at
it's best.
* CPRLite, featuring today's contemporary Christian hits
by top artists."
Read this entire press release here.
From a VitalStream press release: "VitalStream,
Inc. reinforced its technological leadership position in the streaming
industry today with the announcement that Clear
Channel Radio signed an agreement for its 200-plus streaming
radio stations to use the VitalStream Digital Broadcast Network...
"'VitalStream didn't shy away from our traffic numbers
and understood our needs as a broadcasting company,'said Brian Parsons,
Director of Technology for Clear Channel Radio Interactive. 'The
efficiency of the VitalStream network keeps us on track with our
financial goals and allows us to keep the radio stations streaming
on the Internet for our audience while the economics of the industry
continue to develop.'
"According to industry figures, Clear Channel Worldwide
streams more hours of online programming than any other
radio group in the world. Clear Channel streams audio formats ranging
from rock to news/talk through its domestic radio stations in the
top 50 markets...
"VitalStream provides audio and video streaming, Web
conferencing, advanced media hosting, payment processing, and consulting
services."
You can read this entire press release here.
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"Stations
like WFMU...charged a HIGHER rate?.."
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Thanks for posting Mark Cuban's revealing e-mail.
Let's not forget that there was at least one other successful
negotiation between the RIAA and a "willing buyer." The
willing
buyer was the Corporation for Public Broadcasting (CPB), which provides
funding to 1000 public radio and TV stations around the country, including
all NPR affiliates and all Pacifica stations. Most college and community
radio stations in the US are NOT CPB-qualified...
Do we have any way of knowing whether the rate for non-CPB
noncom stations such as my own, WFMU, is based on the rate negotiated
by the willing buyer (CPB) and the willing seller (RIAA)?..
Is it possible that stations like WFMU, which accept no money
from the government whatsoever, are actually being charged a HIGHER
rate than NPR stations, which receive ample government funding?
For the record, WFMU has no intention of ceasing its webcasts,
or of complying with these outrageously unfair rates. We will pay
the flat annual rate only, and document the 75% of our airtime which
is devoted to material the RIAA has no jurisdiction over. I encourage
other non-CPB, noncommercial stations to do the same.
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"Grow
one of your own!.."
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Once again, the constituents our government purports to represent
are sold down the river by their inability to perform the
jobs -- for all of the Congressional representatives in the audience,
"constituents" are the people you *represent*. Clearly,
your attention is turned to an interest more special than the people
who vote you into office.
Shame on you, Congress! I hope you all take a good hard look
at the spines your associates Inslee [right] & Boucher [below
left] have demonstrated ownership of and decide to grow one of your
own...
In a world whose radio waves are owned by the advertisers who
pay Infinity Broadcasting's bills, at least true music lovers could
turn to the Internet radio streams to hear DJs "spin" music
*they* were interested in. Such a wonderful thing it WAS, to discover
NEW music on a daily basis! It's
amazing how people (read, The Consumer) feed off of enthusiasm, as
opposed to carefully calculated marketing productions.
Congrats. My prediction is that you've just moved P2P sharing
of music to a level the RIAA hasn't even seen in their worst nightmares
I see, in our collective future, web sites devoted to nothing but
playlists sorted by genre, detailing artists and song tracks, built
with XML or PHP back-ends to facilitate transparent user additions
to the lists. Former Internet radio listeners, deprived of the budding
industry you just legislated offshore, will discover these "list
sites" and fire up their choice of gnuetella client and raise
a big, fat middle finger in your general direction as they hit the
"Download" button.
Am I angry? Sure. But good God, will someone who's supposed
to represent *the people* please do something about this? The question
isn't "Am I angry" - the question is: "Why aren't you?"
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"Not
the least bit surprised at ANYTHING the RIAA does..."
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We all KNOW the RIAA is a collective monopoly which must be
stopped -- and their collusion with Yahoo! *may* be just the thing
that brings them down.
I'm not the least bit surprised at ANYTHING the RIAA does anymore.
Something MUST be done either through the courts or through Congress.
Honestly, I think that since the DMCA was created under false
pretenses and since the ultimate benefits only to the RIAA, I'd like
to see the WHOLE THING STRUCK DOWN and replaced with a new law which
doesn't favor one party over another.
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Patrick Cook, Program Director
KPDC Internet Radio
KPDC Internet TV |
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"Insults
our very Congresspeople who made effort to do some good..."
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To say the least, the sound was deafening from broadcasters
around the world the day the LOC announced the new Performance Rates.
Cuban's e-mail was even more astonishing, not the facts, but that
he came forward. Is it too late?
Well, I believe right now Congress has an emergency job to
do to fix this fiasco. If anything, the Yahoo! dealing with the
RIAA insults our very Congresspeople who made effort to do some good...
I started my broadcasting at Live365 a year ago this month,
at which time it was free. I started it because I found so many terrific
Blues independent artists on the net, but they were all spread out.
I wanted to created a station where folks could listen to all this
great music easily in one place. Well, in one year I have accomplished
more than I could ever imagine.
I, and many other broadcasters have to weigh out all these
new fees & figure out if we can continue. I can say, because of
my success, it will be a very hard thing to do and I will do everything
I can creatively for this NOT to happen. I do know many have already
reached their limit & will in fact be gone.
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"Never
tried to delude rights agencies..."
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I would like to comment on the recent (June 24th) Mark Cuban
interview. While I cannot comment on the license
reporting policies of other companies, with our OnTheI.com multicast
broadcast service, we have never tried to delude rights agencies that
one multicast stream equals an audience of one; instead we have always
tried to estimate our audience as accurately as possible.
I do not want anyone to have the false impression that the
primary use of multicast is avoid making the appropriate payments
to any rights agency.
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Regards,
Marshall Eubanks |
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"I
used to buy LOTS of CDs I heard on Internet radio..."
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You could smell it coming. Big business always crushes small
business when it can. I hope the people involved in the Yahoo deal
pay dearly for anti-competitive acts. The RIAA has known for years
that copying music actually INCREASES record sales. They barked to
Congress about easy copying when cassettes became a consumer item.
Then they commissioned a study that showed the increase in album sales
since the cassette hit the market, and shut up about it.
As for myself, I am paying back the music industry for killing
Internet radio by encouraging all my friends to download music from
sharing networks instead of buying it.
I used to buy LOTS of CDs I heard on Internet radio. No more.
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"Potential
for a huge public campaign..."
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I think a massive letter writing campaign to Congress to amend
the DMCA is needed in the next few weeks. Both Internet only broadcasters
and stations that stream (such as those Yahoo affiliates) could be
enlisted to put links on their websites to your saveinternetradio.org.
I think there is a potential for a huge public campaign here.
Thank you again for your great efforts.
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| July 8-9, 2002 |
PLUG.IN:
Jupiter Music Forum: New York, NY |
| July 25-28, 2002 |
The
Conclave 2002 Learning Conference: Minneapolis, MN |
| Sept. 12-14, 2002 |
NAB
Radio Show 2002: Seattle, WA |
| Oct. 1-4, 2002 |
Streaming
Media East: New York, NY |
| Oct. 20-22, 2002 |
NAB
European Radio Conference: Prague, Czech Republic |
| Oct. 30-Nov. 2,
2002 |
CMJ
Music Marathon 2002: New York, NY |
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