From a Pillsbury Winthrop Shaw Pittman "Client Alert": "The July 15th reporting and payment deadline for retroactive music webcasting royalties has come and gone, but many webcasters are still unclear as to how they should handle their copyright obligations. Ultimately, any webcaster’s decision as to how to proceed will have to be guided by both consultation with legal counsel and by the economic realities of their business...

Large commercial webcasters have
clearest path but least chance for settlement
"Large commercial webcasters have the clearest path ahead of them... Of all webcaster categories, SoundExchange is most reluctant to negotiate with large webcasters such as Yahoo! and AOL because the increased rates are primarily directed towards them. Thus, large commercial webcasters should be paying royalties at the new CRB rates for 2006 and 2007. These webcasters, however, do have temporary options with respect to the methodology used to calculate royalties.

"The CRB created a transitional period, through the end of 2007, during which webcasters may pay royalties based on aggregate tuning hours ('ATH') at the rate $.0169 per ATH rather than on a per performance basis (per song, per listener) at the rate $.0011 per performance... The new rates are an increase of approximately 40% over the prior rates for large commercial webcasters. The biggest change for these webcasters will occur after 2007, when they will have to discard their use of ATH and calculate royalties solely on a per performance basis...

"Another important concern for this group of webcasters is minimum fee liabilities... The new CRB scheme imposes a  minimum annual fee of $500 per 'channel' of webcasting. Webcasters... fear that each individualized stream of music to a user could be construed as a channel, potentially increasing royalties by millions of dollars in minimum fees...

"In a closed-door Congressional meeting on July 12 [RAIN coverage here] between SoundExchange and various webcaster groups, SoundExchange informally proposed a $50,000 cap on minimum annual fees if a webcaster reports everything that is played and adopts technology that limits the ability of listeners to record those broadcasts and engage in what is popularly known as 'stream-ripping.'

"SoundExchange formally announced this offer in a press release on July 13. The Digital Media Association ('DiMA'), a lobbying group representing large webcasters such as Yahoo, RealNetworks, and AOL, accepted SoundExchange’s offer, promising to improve reporting and to 'research, identify, review and evaluate' the prevalence of stream-ripping and potential technologies to limit it. Thereafter, however, Sound- Exchange denied making the offer as DiMA understood it and accused DiMA of mischaracterizing their negotiations [RAIN coverage here and here]...

"As these discussions become more contentious, the possibility of a negotiated solution in the near future looks unlikely. Furthermore, any settlement agreement that is reached would not be legally binding until it has been finalized with the groups representing the webcasters involved, approved by the SoundExchange Board, and then ratified by the CRB or through some other form of government action. As of this writing, none of this has happened, and the new CRB scheme is still the law.

Small commercial webcasters, non-comms face "rock/hard place" decisions
"Small commercial webcasters and non-commercial webcasters may have to make difficult choices because their situation is even less clear... SoundExchange is in active negotiations with both of these groups.

"For small commercial webcasters, SoundExchange has offered to extend the terms of the Small Webcasters Settlement Act of 2002 for the 2006 to 2010 period, but groups such as the SaveNetRadio coalition, representing webcasters, listeners and artists, expressly rejected the proposal as an inhibition of Internet radio.

"For non-commercial webcasters, SoundExchange has also suggested a settlement to preserve old rates, with some changes in reporting requirements. This offer, though, was only made informally to a small group of non-commercial webcasters...

"At the July 12th congressional meeting, a SoundExchange executive announced that the organization would allow small and non-commercial webcasters to continue streaming music while negotiations continue [RAIN coverage here]. News sources quickly reported that SoundExchange had offered these webcasters a reprieve, but SoundExchange clarified in subsequent statements that it expects timely payment from all webcasters... The organization also emphasized that all overdue payments would accrue interest, which the CRB increased in its March decision from .75% to 1.5% per month...

"This leaves small commercial webcasters and non-commercial webcasters in a difficult situation... Many may choose to stop webcasting altogether after considering the financial feasibility of continuing under the new scheme. Even if a webcaster ceases webcasting, however, it would still need to pay the retroactive royalties dating back to January 1, 2006...

"Other entities may choose to continue webcasting and hope that SoundExchange exercises restraint in enforcing these new rates until negotiations are successfully concluded or some other outcome, such as litigation or legislation, succeeds in changing the CRB’s decision. Webcasters must remember, however, that the royalty payments are now due, and, until the issues are resolved, copyright holders could take legal action against those who have not satisfied their royalty and reporting obligations. Thus, any decision on this issue should be made only after consultation with legal counsel."

Read this entire Pillsbury Winthrop Shaw Pittman "Client Alert" (.pdf file) here.

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From eMarketer: "Internet radio's modest success has brought unwelcome attention from the music industry, which is moving to collect more revenue when Webcasters play copyrighted music. But the online stations are still growing, and some sources suggest that they will outpace other types of new radio, including HD radio.

"Internet radio will generate ad revenues of $19.7 billion in 2020, equal to those of terrestrial radio in 2006, according to a Bridge Ratings press release issued in August 2007.

"Bridge Ratings made the projections as part of a study comparing Internet radio adoption with HD radio. Bridge Ratings surveyed consumers ages 12 and older in June and July 2007...

"It is worth noting what Bridge Ratings includes in its estimates of Internetradio ad revenue,' said eMarketer senior analyst Ben Macklin. 'The total includes both in-stream audio ads as well as online ads, banners and buttons on Radio Web sites and media players,'...

"Bridge Ratings estimates that Internet radio will have 180 million listeners by 2020. Terrestrial radio will have 250 million listeners. But HD will have less than 10 million.

"Kagan Research forecast in 2005 that US terrestrial radio broadcasters would be earning 4%, or $805.2 million, of their total revenues from HD radio, mainly due to multicasting abilities. They also thought that ad-supported 'now' channels offering local information would bring in a large chunk of revenue. So far, it has not happened.

"'The value proposition for HD radio is less clear than with Internet radio, which gave people something they didn't have before — a larger range of music types and a greater quantity of music overall,' eMarketer's Mr. Verna said."

Read the entire report at eMarketer.

Read radio analyst Mark Ramsey's analysis of the report at his Hear 2.0 blog.

From TechCrunch: "Apple isn’t just sitting on the sidelines as startups like iLike and MOG and others try to tackle the social music space. Many of these  services gather user music preferences via an iTunes plugin. You are then able to tell the world what music you are listening to, get recommendations for new music you might like, etc. People love this stuff...

"Apple has launched My ITunes...

"There are currently three embeddable widgets to choose from. One shows recent iTunes purchases. Another shows music you’ve reviewed on iTunes. The last shows a sort of tag cloud of artists you’ve purchased on the iTunes store...

"The first and last widgets only work if you’ve actually bought stuff on iTunes... But what would be far more interesting is a widget that, like iLike, shows your favorite music and plays at least a 30 second snippet of each song."

Read the entire article at TechCrunch.

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