Special issue coming soon: Most indicators seem to be pointing (finally!) toward a more-successful 2003 for both broadcasters and webcasters. To help you in your planning process for next year, RAIN's upcoming "Planning for 2003" issue will showcase products and services that will help you reduce your expenses and increase your revenues in 2003!
For YOUR firm to be included, call RAIN at 1-312-527-3869 or e-mail kurt@kurthanson.com

BY PAUL MALONEY
Through industry sources, RAIN has learned that webcasters and representatives of broadcast industry groups, the recording industry, and members of Sen. Jesse Helms's staff were busy today hammering out an agreement more acceptable to a wider segment of the industry than the controversial HR 5469.

The "lame-duck" session of Congress, following elections but before newly-elected members begin their terms, began yesterday.

Now, a third version of a bill called HR 5469 would remove all actual specific rates and percentages from the law, and would give the Recording Industry Association of America (RIAA) and SoundExchange the authority to cut individual private deals with webcasters on the "retroactive" royalties (those royalties based on sound recording performances made between October of 1998 -- the passing of the Digital Millennium Copyright Act -- and September 1, 2002), a power they don't currently have.

While we couldn't report on all the terms yet, RAIN sources familiar with the specifics of the bill have said this deal is significantly more agreeable to all webcasters.

Rep. Jay Inslee (D-WA), in a press release, indicated his support of today's "working meetings to modify the original Small Webcaster Amendments Act (HR 5469) [see RAIN here] by Senators and Members of Congress, RIAA/SoundExchange, small webcasters and the National Religious Broadcasters."

Inslee, along with Congressmen Rick Boucher (D-VA) and George Nethercutt (R-WA), introduced the Internet Radio Fairness Act (HR 5285) in July (see RAIN here). That proposal was largely abandoned by the involved parties when House Judiciary Committee Chairman James Sensenbrenner introduced the original version of HR 5469, a six-month moratorium on webcasting sound recording royalty fees. It was intended to save small webcasters from the impending "retroactive" royalties, which were due October 20th.

After objection by the Committee's ranking Democrat John Conyers (D-MI), at the behest of musicians unions, HR 5469 was shelved. Sensenbrenner called webcasters and the RIAA to his office and demanded a deal be worked out. That deal, which changed HR 5469 to a "small webcaster" deal, sparked a divisive controversy in the webcasting industry.

HR 5469 -- before today -- set special royalty rates and minimum payments for defined "small webcasters" and "noncommercial, non-FCC webcasters." Additionally, record keeping requirements were amended, and a report to Congress on the effect of third-party relationships and the possible detriment of percentage-of-revenue based royalties.

Please see RAIN tomorrow for more details on this developing story.

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From earlier today...

From USA Today: "XM Satellite Radio, pioneer and leading provider of nationwide satellite radio programming, laid off 80 of its roughly 480 employees and began switching to less-expensive programming as it grappled with the transition from money-eating start-up company to one that investors expect to spend less and make a profit.

"The layoffs and program changes are to be announced Thursday, same day as a previously scheduled XM conference call with Wall Street analysts to discuss third-quarter losses. XM lost $117 million in the second quarter. Wall Street has been pressuring XM to cut spending enough to stay in business.

"'They are burning $90 million a quarter,' says William Kidd, analyst with Lehman Bros. 'It's very difficult to be supportive of a business when the future is uncertain.' Wall Street analysts forecast that XM, launched in December 2001, will run out of cash after the first quarter next year unless it cuts costs and attracts new investment...

"Chance Patterson, vice president at XM, says the company doesn't plan more layoffs and should break even by late 2004. XM claims 201,500 subscribers and predicts 350,000 by year's end."

Read the entire USA Today article here.

According to XM VP/Corporate Communications Chance Patterson, the layoffs are primarily from the terrestrial programming, sales and marketing, and retail distribution departments. Patterson says the company actually plans to increase its advertising sales staff.

Today the company also announced it had ended the third quarter with 64,836 new subscribers, for a total of 201,544 -- a 47% increase.

Last month, the XM-developed SKYFi radio (see screenshot) hit retail shelves. According to the company, the unit (manufactured by Delphi) is a "plug-and-play" unit offering "the most advanced features of any satellite radio," and can easily move between the home, car, or nearly anywhere else.

XM also reports today that its service will be made available in a wider range of General Motors automobiles. Twenty-five different 2003 vehicle lines now offer XM, like the Chevy Avalanche, GMC Yukon, Pontiac Grand Am and Cadillac CTS. According to the release, GM says they'll equip up to 400,000 2003-model vehicles with XM radios. Honda and Nissan also recently announced they would make XM available in select models.

XM will halt its USA Today and "Babble On" programming, and will add a channel will CNN-supplied programming, "post-grunge" alternative rock channel, and a live music channel. And reportedly, next week Internet radio station LiquidSoulRadio's programming will debut on the XM channel "The Flow."

The company press release on the announcement of XM's Q3 earnings is here. More details are in a Washington Post story here.

...

... Satellite radio's rollout is slow... Too slow? Satellite radio has a tough row to hoe right now. The programming is hailed as a huge success, but consumers are not embracing the concept enough to buy aftermarket radios in significant quantities and the auto manufacturers are being way too slow about offering the radios in new vehicles. Part of their problem should have been at least influenceable by the radio guys who work in programming for XM and Sirius -- or would have been in the organization structure of a terrestrial radio station: Their marketing is NOT getting a clear communication of their benefits across to consumers. (TiVo has the same problem.) And when you read subscriber numbers for the two services, realize that that's approximately their cume. (Well, you do have to add in other passengers in the cars behind the driver who subscribes.) If XM actually hits 350,000 subscribers at year-end, the average XM channel will have -- let's do the math (maybe the radio's on 1/6 of the 6AM-12M broadcast day (3 hours/day), with 1.5 listeners per car, divided by 100 channels) -- an AQH of, I would estimate, about 875 listeners. By comparison, the eighth-ranked station in Eau Claire, WI (market rank #242, population 127,000) has a larger audience size than that. Yow. Which leads me to three observations: (1) PDs are expensive. It must be frustrating to XM and Sirius to be paying high-five- or low-six-figure salaries to the various channels' program directors when their audience sizes are in the three figures. (And, conversely, the PDs must be frustrated with the sales and marketing efforts that are responsible for the low subscriber rate, because their programming is, as noted above, hailed as great.) (2) XM says they'll be spending MORE on their ad sales efforts. But even if you bundle all of their, say, rock channels together, it's hard to imagine there could be much national advertiser interest in this audience yet. (Ten channels x 875 AQH listeners = one 4.0-share station in Milwaukee.) (3) Wireless Internet access will be available in cars someday on an unlimited-rate pricing plan. If satellite radio doesn't get a foothold soon, eventually 50,000 channels of Internet radio for free could trump 100 channels for $10 or $13/month (This is what I call "the Iridium problem:" a space-based solution takes so long to implement that a land-based solution gets in ahead of it.) -- KH ...

From The Wall Street Journal: "Clear Channel Communications Inc. (CCU) will open a new Washington office and name Andrew W. Levin, a longtime Democratic staff member in the House of Representatives, as its senior vice president for government relations...

"The company hasn't previously had a Washington-based lobbyist, but it has quietly been ramping up its public relations and policy efforts in recent months. The move comes as Clear Channel has been in a spotlight for a number of reasons, including its enormous reach as the biggest U.S. radio-station owner and concert promoter. Music-industry critics have focused on the company's tough business style and relationships with so-called independent promoters...

"Mr. Levin, 40, is a longtime Democratic staff member on the House Energy and Commerce Committee. He is currently minority counsel to the committee, and chief telecommunications advisor to Michigan Rep. John D. Dingell, the committee's ranking Democrat."

Read this article online (for free) in Yahoo! here.

From the Musicmatch press release: "Musicmatch announced it has obtained non-exclusive licensing agreements from BMG, EMI Recorded Music (EMI), Universal Music Group (UMG) and Warner Music Group (WMG). The agreements will allow Musicmatch to offer each label's digital catalog through its new online subscription service, Artist On Demand.

"Launching in December, Artist On Demand is a new interactive streaming service that will give users the ability to enjoy instant playlists composed of artists of their choice...

"Musicmatch introduced Radio MX more than a year ago, and today more music fans have subscribed to the service than any other online music subscription service. Continuing on this innovative trend, Musicmatch Artist On Demand will bridge the gap between Internet radio and music download services by providing a quick and easy way for music fans to hear an instant playlist of the best music from their favorite artists."

...

... The fifth major label group not yet involved with the Musicmatch deal is of course Sony Music, home of the likes of Travis Tritt, Billy Joel, Tori Amos, Bruce Springsteen, and Tony Bennett. As others have mentioned, keep in mind that this type of "artist on demand" presentation is allowed with a special license. The DMCA "performance complement" ("no more than three songs in a row by a single artist," etc.) applies only to webcasters operating under the "compulsory license." While these four major label groups represent enormous rosters of hugely popular artists, it's not yet apparent which actual artists will be available for "On Demand." However, we see it as a very positive and constructive step by MusicMatch who (like companies such as Listen and FullAudio) seem to really be trying to address consumer demands for music online. Musicmatch has not revealed its anticipated price for the service. -- PM ...

From the San Francisco Chronicle: "EMI Recorded Music, one of the world's largest record companies, revealed Wednesday its broadest Internet distribution plans to date, saying it will release new singles online and offer more downloadable songs for customers to keep and copy onto CDs.

"Meanwhile, Warner Music Group plans to announce a deal today that makes Pressplay the first online music subscription service to offer CD-burnable music from each of the world's top five biggest record labels.

"The two announcements are the latest steps in the recording industry's slowly evolving efforts to offer consumers a competitive alternative to the already popular practice of downloading and copying songs via the Internet without having to pay."

Read this entire article here.