Thanks to all the fine companies (including those listed below) who agreed to be part of our recent "RAIN Vendor Guide (Ver. 2.0)" issue. If you didn't have a chance to spend time with it yet, you can access the issue here.

The U.S. Copyright Office has published in the Federal Register their full final rule and order on webcasting royalty rates. The document sheds quite a bit of light on the reasoning used by the Register of Copyrights and the Librarian of Congress in their decisions. Please see the document online here, and then look for analysis soon in RAIN. Thanks.

BY KURT HANSON
NEW YORK -- More than 300 music industry executives are gathered in New York City this week to attend the 7th annual Jupiter Plug.In conference on online music, which yesterday featured keynote addresses from both Congressman Rick Boucher (D-VA) (pictured, at right) and RIAA CEO Hilary Rosen.

The event also featured a panel of execs from subscription services including Rhapsody and MusicMatch, a panel of retailers, and an on-stage "focus group" of teenage music consumers.

Boucher: "Go on and take off the brakes"
Keynoter Boucher, one of the two co-chairs of the Congressional Internet Caucus, explained to the attendees that while he is to some extent a music fan, his primary motives in the space are based on his desire to promote and stimulate broadband deployment, and that he feels that music is the best near-term approach to do so.

Furthermore, by resolving Internet-related copyright issues now for music, he noted, useful precedents will be established for other forms of content (films, e-books, etc.) in the future.

Boucher described the elements in the Music Online Competition Act (MOCA) that he and Utah Congressman Chris Cannon (R) are sponsoring, which include clearing up numerous "burdens" in copyright laws that inhibit the growth of the medium. (Those elements include a request for a comprehensive study of the value of the "performance complement" rules that restrict, among other things, the number of times that an online or satellite radio station can play a given artist in a three-hour period.)

Inslee and Boucher to propose new legislation
this week for smaller webcasters
Boucher announced that he and Congressman Jay Inslee (D-WA) will be proposing legislation this week to provide a short-term remedy for smaller webcasters who would otherwise be bankrupted by the recent Librarian of Congress ruling on royalty rates. Their bill will propose deferring smaller webcasters' royalty obligations until the next CARP cycle.

"Hopefully we'll have a whole new standard in place," Boucher said, adding that he hoped it would include a consideration of "fairness" and the more traditional percentage-of-revenues structure "to give the young and small the same ability to compete as the older and prosperous."

(CONTINUED BELOW)

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(FROM ABOVE)
Rosen: "It's time to come together"
and "Ignore the naysayers and carpers"
One hour later, RIAA CEO Rosen began her keynote by proclaiming, "It's time to come together."

She called this "a critical juncture in our relationship with music fans" and noted that her member labels face a situation "unique in US commercial history" in that they have suddenly had to compete with their product being offered for free by the peer-to-peer file sharing services.

She spoke briefly on the subject of Internet radio, noting that she was "adamant" about getting "market rates" for webcasting. "If the government wants to subsidize webcasters, let it. We can't afford to," she said.

Regarding public policy issues, she said, "Our data shows very clearly that downloading and burning are hurting sales." She added, "Don't listen to the naysayers and carpers that say everything has to change."

Rosen: "The Beethoven.com guy
doesn't want to pay anything"
In a question-and-answer period following her address, one audience member (me) asked Rosen if the RIAA truly felt it was in the best interests of labels to let most of the pioneer webcasters be bankrupted by the CARP decision -- and whether webcasters' only hope was for Boucher's proposed legislation or whether she could offer any hope for a compromise solution.

Rosen responded by saying she didn't believe Boucher's bill would pass. She told an anecdote about an executive from the classical label Naxos Records who complained to her about how it would be impossible for his firm to compete with smaller independent webcaster Beethoven.com, because the guy from Beethoven.com has said didn't want to pay for his music.

"This is not a mom and pop issue, this is a business model issue," she concluded.

Teens on downloading music:
"You're not making me feel bad"
In the last session of the day, following a "keynote conversation" by RealNetworks Chairman and CEO Rob Glaser, Jupiter analyst Stacy Herron conducted an "on-stage focus group" with fourteen NYC-area teenagers on their music consumption habits.

The vast majority of the panelists were extremely infrequent CD buyers. Most said they listen to music on their computers rather than stereos, and many had collections of thousands of MP3 files (several had 5 to 10 gigabytes of files) that they had obtained primarily from peer-to-peer services like Kazaa, Morpheus, and LimeWire. (One teen noted, "On behalf of all of us, I apologize to the music community.")

One panelist explained their behavior by saying, "We're teenagers — we're cheap and we're lazy" and added, "and we don't have a lot of money."

One interesting observation was that CDs are inconvenient because they want their music in the MP3 format, and buying a CD requires an additional step (ripping) to convert the music into that format.

Virtually none of the panelists seemed to have any moral qualms about downloading files from the P2P services. One teen said, "My father's a musician and my mom is a lawyer who works for CBS fighting music piracy, and they don't mind at all." An audience member asked, "You know it's illegal, right?" to which one panelists replied, "You're not making me feel bad," and another noted, "Jaywalking is illegal but still everybody does it." ("None of this equipment is illegal. They give it to you!" one panelist observed.)

None admitted to being regular users of broadcast radio either. Their musical tastes spanned from hiphop (the most-popular genre on the panel) to reggae, jazz, and Broadway. "All the music on commercial radio and MTV is crap right now," was the generally-agreed-to consensus.

When asked for their opinions of MusicNet and Pressplay, none of the panelists said they had ever tried either one. Pressed further, it came out that none of the teens had even HEARD of either service!

...	... This is precisely what many observers warned the record industry two years ago would happen if Napster was simply shut down -- that young people would switch to less-controllable forms of peer-to-peer sharing. ...

From the EarthLink press release: "EarthLink, one of the nation's leading Internet service providers, today launched the EarthLink Digital Music Center. This new online music resource is a label-neutral distribution channel offering consumers a convenient and inexpensive venue for streaming, renting and purchasing music.

"The Digital Music Center is both a compelling alternative to traditional retail outlets, and a viable, more secure and higher quality option to consumers using the popular, yet questionable file-swapping sites...

"EarthLink Digital Music, powered by FullAudio, allows subscribers to download up to 50 tracks each month for a $9.95 monthly fee or up to 100 tracks each month for a $17.95 monthly fee. Once the music is downloaded from EarthLink Digital Music, subscribers have unlimited access to the tracks in their library, and over time, music fans can continue to accumulate tracks and build their music collections as long as their subscription is active...

"The EarthLink Jukebox, powered by MUSICMATCH, offers everything music fans need for organizing and enjoying all of their favorite music through a co-branded version of MUSICMATCH's comprehensive and robust music player. The CO-branded player serves as a hub for music discovery and management in four service levels: free Jukebox 'Basic,' Jukebox 'Plus' for a $19.99 one-time fee, free online Radio, and the subscription-based Radio MX personalized music service for $4.95 per month."

The full press release is online here. RAIN readers may remember that at one time, EarthLink Internet radio services were provided by the now shuttered RadioCentral.



From AP in MSNBC: "Responding to the rampant spread of unauthorized music swapping on the Internet, Universal Music Group plans to put a large chunk of its vast music library online through a subscription service beginning Tuesday.

"UMG, the largest of the five major record companies, will make about 1,000 of its 11,000 albums available to subscribers who pay between $10 and $15 a month.

"Unlike most other initiatives announced during the last six months, UMG’s partnership with Emusic.com, a downloadable music subscription service, gives customers the same ownership rights as if they had bought the music on a CD. That means users will be able to store tracks and transfer them to CDs or portable players using the popular MP3 file format.

"But UMG is selecting the content it makes available selectively. Rather than offering the work of best-selling artists like Eminem and U2, UMG has chosen older, less popular content that doesn’t sell quickly in stores. UMG executives want to see if the music service can actually boost sales inside stores, or whether it ends up cannibalizing physical sales."

Read this complete story here.

"May take listening hours away from streaming and broadcast..."

I sincerely congratulate MusicMatch on their breakthrough ratings from Measurecast.

I would suggest that it is important to notice that Measurecast's Top Internet-Only "channel," MusicMatch "ArtistMatch", more closely resembles Artist-On-Demand and bears less resemblance to programmed Internet or broadcast radio.

Most Internet radio programmers may not have the massive number of users needed for ArtistMatch type programming over multi-genres. There may also be cost factors. This may play directly into the AOL, Yahoo, MTV, Clear Channel, large company dominance on the Internet.

Artist-On-Demand may also impact prerecorded music sales. If you can put in Britney's name and hear her hits anytime you want, who needs to buy the albums? It may also take listening hours away from streaming and broadcast radio.

The consumers' desire to settle for just listening to streaming station playlists may lessen after Internet digital music delivery software begins to offer the regular availability of Near-Artist-On-Demand and other self-programming options, including purchase of downloads.

As a sidenote, the frequent suggestion that many or most people would listen regularly to unusual and unknown music offered by virtually unknown streamers on the Internet is not greatly supported after years of alternative systems being offered, from Wired Planet to Moodlogic. It is still Top Hits, Soft Hits, Smooth Jazz Hits, etc. that lead in the Measurecast online ratings. My personal experience at MusicMatch was that even "ArtistMatch" was most often programmed by users requesting Hit artists from different genres, thus it's broad appeal.

In conclusion, the next big thing may be online Request Radio (near-artist-on-demand) with built-in impulse purchase of songs by download, similar to the opportunity represented by Full Audio joining Clear Channel.

Here is a growing list of webcasters who, because they don't feel they can manage webcasting royalties in a viable business, have decided that it's in their best interests to silence their streams. (We thank them for their hard work and dedication to their audiences and the industry, and wish them luck in their future endeavors...)
3FM/Netherlands	All80s.com	AudioCandy.com
BlueMars.org	Chez Whitey	Entercom stations
Good Time Oldies Radio	Greater Media stations	GrrlRadio
HitRadio.biz	Hot Hit Radio	IdahosCast.com
KDFC/San Francisco	KKDV/San Francisco	KOIT/San Francisco
KTRS/St. Louis	Lotus Radio stations	McClure stations
Mix967	MonkeyRadio.org	MYNDFK.com
NetRockRadio.com	NextMedia stations	Perkigoth.com
Powerrocks.com	Progrock.com	Radio1/Netherlands
RadioCentral.com	Radio Free Akron	Radio Free BD
Radio Free Tiny Pineapple	RadioMaxMusic
RKNA: Aural Arcana	SavageRockRadio.com	Simmons Media stations
SomaFM.com	StarDogRadio.com	TagsTrance.com
The City Radio	therockfm.com	The Zoo
WAAF/Worchester	WMMR/Philadelphia	WOVRadio.com
XTC Radio	Yahoo! Radio stations
Have we missed others? Use the feedback form above or e-mail us here.