BY KURT HANSON
SoundExchange spokesperson Richard Ades told RAIN today that, despite press reports to the contrary (see next story, below), his organization's request for “help” with streamripping is not necessarily a demand for DRM-protected streams.

Ades said that his group "[does not] think it's just DRM — we believe that there are a lot of potential technical solutions."

A letter sent by SoundExchange executive director John Simson to DiMA last Friday noted that an offer from the recording industry to cap the $500-per-channel minimum fee was provided that webcasters:

"1. immediately comply with their reporting obligations and move to full census reports of use within 90 days. We will work with services to ensure that reports are done in compliance with CRB rules and regulations; and

2. webcasters agree to Implement technology to prevent streamripping... provided such technology is feasible and is available on reasonable terms."

On that point, Ades noted that, "'feasible' is a very broad term — it doesn't mean just feasible in cost, but acceptable to the consumer as well.  We don't know what's going to work."

Ades said that the parties are talking now about how to more clearly define such terms as "feasible" and "reasonable," "but we don't want to negotiate in the press."

...

x Webcasters don't want their music libraries turned into music libraries on a listener's iPod any more than labels want that. However, most observers (including all of us here at RAIN) feel that if streamripping ever becomes a genuine problem, lower-tech solutions (like adding cross-fades between songs) will be more effective than any form of DRM could ever hope to be. x

BY DANIEL MCSWAIN
A recording industry-mandated DRM scheme for Internet radio could be a nightmare scenario for webcasters and consumers. But press reports suggest that the digital anti-piracy measures often maligned by operators and consumers alike could be exactly what the music industry has in mind.

Writing at the LA Times' "Bit Player" blog, Jon Healey reports that when it comes to the newly-minted streamripping problem, "the RIAA's favorite solution comes from Media Rights Technologies (MRT)," a San Mateo, CA based firm whose "X1 Recording Control" product appears to be the DRM tech favored by the recording industry.

The RIAA's "favorite solution"?
MRT made news back in May when the firm's CEO Hank Risan sent cease-and-desist letters to Real, Apple, and Microsoft, among others, alleging that the firms were in clear violation of the DMCA for failing to protect the audio streams they delivered with a particular type of DRM, namely a product made by (perhaps unsurprisingly) Risan's own company. [Image at right is from Gizmodo.com]

MRT went even further in a July press release, which noted that it had petitioned "Dr. James H. Billington, Librarian of Congress...to revoke all statutory internet broadcasting licenses granted under Section 114 of U.S. Copyright law for webcasters who are in violation of that section by willfully distributing their content as an interactive service."

In an April press release, Risan went on to make a number of startling claims. According to Risan, a conversation with RIAA president Cary Sherman in 2001 alerted Risan to the upcoming streamripping danger, with the record industry exec predicting that the obscure technology would some day "significantly impact digital entertainment revenues."

Risan goes on to write that, "according to recent MRT studies, Stream Rippers [sic] are growing at the rate of well over 15 million units per month, with over 250 million user downloads in the last few years, costing the entertainment industry $20 to $50 billion annually. The problem has now eclipsed P2P file sharing as the #1 form of digital piracy."

However, Risan did not quote any sources for those statistics.

Does anti-streamripping technology infringe on "fair use"?
As discussed previously in RAIN, streamripping appears to pose no immediate threat to webcasters or copyright owners at this point in history, since consumers who want to build digital libraries at low or no cost are doing so much more easily by using peer-to-peer file-sharing services.

To further clarify, most streamripping happens towards one of two ends:

• Time-shifting — the completely legal recording of audio by digital means to be played back at a later date

• Digital library-building — while falling under the umbrella of "fair use", it seems obvious that most webcasters would (if the practice were to become more widespread) take simple countermeasures that would be far less onerous and restrictive than implementing DRM

The RIAA-favored DRM fix would disable both practices. Neither side wants users to be able to build digital libraries via streamripping — it's obviously detrimental to the businesses in question.

But time-shifting is commonly accepted as an acceptable practice even by SoundExchange, and a DRM solution infringes on consumers' ability to enjoy digital music legally.

Why DRM is not the preferred solution
The "MRT solution," which only protects files encoded in the Windows Media format, would up-end businesses like Pandora, Live365, and last.fm that stream MP3 audio were the recording industry to mandate such a scheme.

Of the other possible countermeasures to streamripping — streaming at relatively low bitrates, crossfades between songs, DJ talkovers, missing or intentionally misidentified metadata) — only the final solution has a potential workaround, and then only if software capable of acoustical fingerprinting or dynamic range analyzing were to someday be able to potentially thwart such a method.

The argument could be made that DRM like the MRT product is potentially worse than the above workarounds.  Nobody has software that can remove a crossfade or a DJ talkover from a song with any respectable results.  However, every major DRM scheme in existence has been cracked — that includes Apple's iTunes DRM as well as the Windows Media DRM (see MSNBC coverage here).

From Eliot Van Buskirk's "Listening Post" blog in Wired: "New music royalty rates for webcasters went into effect last Monday, but the charges continue to be fiercely contested...

"Decisions made now could have an enormous impact on how we consume music in the coming years and decades. Suffice to say it's in no one's interest to kill net radio...

"To advance the debate, here's a proposal for webcasting royalty rates that attempts to synthesize the interests of labels, webcasters and listeners.

Commercial webcasters should
pay a percentage of revenue
"Under the current Copyright Royalty Board, or CRB, scheme, webcasters are the only radio broadcasters required to pay a per-song-per-listener royalty rate...

"I propose a compromise based not on per-stream rates but rather on a percentage of revenue, as follows:

• Small and noncommercial webcasters (gross revenue up to $250,000): 10% of gross revenue or $500 per year (total, not per channel), whichever is greater
  
  
• Medium webcasters (gross revenue of $250,000 to $500,000): 12% of gross revenue
  
  
• Large webcasters (gross revenue above $500,000): 14% of gross revenue

The above rates deny SoundExchange its per-song-per-listener performance royalties, but in return give it a much higher percentage of webcasters' gross revenue than the 7.5% they would pay if the Internet Radio Equality Act were to pass.

No DRM — staggered metadata instead
"SoundExchange's executive director Jon Simson said his organization would cap minimum per-station fees if webcasters worked to make their webcasts unrecordable — one assumes through the use of some sort of digital rights management technology...

"Rusty Hodge [left], founder of SomaFM, came up with an ingenious solution: presenting song metadata in a way that keeps stream-ripping programs from automatically splitting songs into separate files. Hodge wrote...: 'You just don't send metadata, or send it at irregular intervals, or intersperse variations of the track name (e.g. alternate between artist and track name).'

"This solution would obviate the need for DRM on webcasts while defeating automated stream-ripping programs... It's counterproductive to force all listeners to jump through DRM hoops in order to prevent a small percentage of them from using Internet radio as a clumsy, tedious music downloading technique.

Lower rate for customized streams
"SoundExchange says it needs to collect a minimum of $500 per station per year in order to pay for the administration costs associated with processing a single station's playlist. However, webcasters claim that rate would result in industry fees totaling nearly $1 billion — 50 times the actual royalties webcasters would owe, which they estimate at a mere $20 million. In addition, some popular webcasters today stream a customized station for each user; the minimum per-station fees would prevent them from doing so...

"Webcasters who offer multiple streams should be required to combine their playlist reporting into one unified list for royalty payment purposes, but should also be required to itemize what each of its channels played...

Minimize doubt about the future
"At least one webcaster has complained that it's hard to lure investors and partner with companies since webcasters themselves have no idea whether their businesses will still be able to operate in 2010 when the rates expire. To stave off this uncertainty... the CRB, when it hears arguments from webcasters and SoundExchange again in 2010, should be limited to a 0.25%-per-year maximum rate of change in setting webcasting royalty rates going forward...

SoundExchange opt-out database
"An artist or label (whichever owns the sound recording rights to a song) can deal directly with webcasters outside the SoundExchange system, setting up whatever arrangement they want — including no royalty payment for playing the songs...

"Rather than forcing artists and labels to notify individual webcasters that it's OK to play their music without reporting or paying for it, SoundExchange, as the main point of contact between webcasters and artists/labels, should distribute its own opt-out database to webcasters. If SoundExchange is going to collect royalties without being asked to, it should make it easy to opt out of that system on a song-by-song basis...

Keep paying both artists and labels
"Yahoo Music CEO Ian Rogers [right] said there's a danger that if the existing rates stick, large webcasters such as Yahoo could decide to deal directly with the labels, which typically own the sound recording rights, bypassing SoundExchange and, by extension, artists.

"These direct deals would also likely result in large webcasters focusing on music from Recording Industry Association of America labels, since it would be harder to set up deals with smaller labels and artists. With the royalty rate scheme suggested above — or something similar — large webcasters won't feel the need to circumvent SoundExchange, and artists of all stripes can continue to profit from the online performance of their music."

Van Buskirk's entire column is online here.

...

... Van Buskirk's proposal is in the ballpark of what SoundExchange and webcasters were rumored to be discussing last summer, as they were in negotiations that could have eliminated the need for the CRB hearings in the first place. With the CRB decision hanging on there on one hand — with rates so high that, if implemented, it will either drive webcasters off the air (with no royalties for anyone) or to direct deals with labels (with no royalties for artists) — and the IREA making progress in Congress on the other hand (which would set the royalty rate at 7.5% of revenues), a compromise along the lines of what Van Buskirk proposes might in fact be a sane third path. -- KH ...

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