America's nascent Internet radio industry continues to react
in shock to Thursday's Copyright Arbitration
Royalty Panel ("CARP") recommendation that
Webcasters pay "performance rights" fees to record labels
that are so high that they are currently more
than 100% of most Webcasters' gross revenues!
The panel's recommendation was addressed to the U.S. Copyright
Office, which will recommend to the Librarian of Congress whether
to accept, reject or modify the rates and terms set forth in the
report. The Librarian must accept or reject the report by May 21st.
Under the recommendation, Internet-only Webcasters would be
required to pay royalties of .14 cents per listener per song transmitted,
or roughly $.02/listener-hour
(assuming about 15 songs per hour). Given the current low levels
of advertiser support of Internet radio, most Webcasters are not
seeing anything close to $.02./listener-hour in revenues
suggesting that the recommendation, if adopted, could essentially
stop the industry dead in its tracks.
As the New York Times reported on Friday, "Representatives
from both sides can continue to press the Copyright Office for proposal
changes for 60 days. Eric E. Van Loon, a member of the three-person
arbitration panel, said that the panel had received more than 14,000
pages of testimony from more than 50 witnesses." (According
to RAIN's calculations, that works out to 280 pages
of testimony per witness.)
CARP's proposed performance license fees for Internet simulcasts
of AM and FM signals are half of the fees proposed for the Internet-only
Webcasters -- but the simulcast portion of the Webcasting industry
is already feeling pain from high streaming costs, impossibly-high
AFTRA talent fees, and a lack of support from top-level management.
How did this happen?
DiMA recommended a flat per-hour fee!
It was the hope of many webcasters that the performance license
fee CARP recommended would be based upon a percentage
of each Webcaster's revenues. That way, the industry
could grow, and the record industry could make money right along
with it -- more revenues for Webcasters, more compensation for copyright
However, the association representing Webcasters in the arbitration,
the Washington, D.C.-based Digital
Media Association ("DiMA"), may have
started arbitrators down the flat-fee
path in its testimony and its recommendation of a $.0015/hour license
As shown on the DiMA website here,
DiMA took broadcast radio's ASCAP-BMI-SESAC license fees (designed
to compensate composers), which are in reality calculated as a percentage
of radio station revenues, and translated
them into an approximate price
per hour of programming.
DiMA then recommended an label-and-artists' license fee 30% lower
than the composers' license fee.
Unfortunately for Webcasters, CARP embraced the concept of that
translation into a flat fee...but recommended a fee 14
times higher than DiMA proposed.
Could Internet radio eventually
support a $.02/listener hour license fee?
observers, including all of us at RAIN, believe
that advertisers will eventually
embrace Internet radio as an advertising medium. After all, if,
say, Arby's is willing to pay a penny to deliver a 60-second advertising
to a single consumer's ears via the AM or FM band (i.e., a $10 CPM),
as they are, why wouldn't they logically, eventually, be willing
to pay the same penny to deliver the same advertising impression
to the same pair of ears via Internet radio?
problems right now are
radio audiences are still too small to warrant much agency attention,
in the depressed post-9/11 advertising spending environment, agencies
are looking for places to cut back, not new media opportunities
to consider, and (3)
agency infrastructure is not yet in place -- in other words, the
department that buys Internet doesn't have audio-based creative,
and typically the department that buys audio ads isn't currently
allowed to buy anything on the Web.
the medium is allowed to grow, these problems will inevitably
At that point, CARP's proposed $.02/listener-hour performance royalties
might not be the kiss of death, as they would be covered by selling
two spots per hour at current local or national radio station spot
prices (or several spots per hour at current network radio spot
there's no way to get there! If
this year's license fees are higher than anticipated gross revenues,
there will be virtually no Webcasting, and thus no audience growth,
and thus no interest from advertisers.
To be continued.
The Wall Street Journal: "On Feb. 15, disc jockey
'Cabana Boy Geoff' Alan offered up a special treat for listeners
of KISS FM in Boise, Idaho: an interview with pop duo Evan and Jaron
"The artists reported that they had just come from skiing
at nearby Sun Valley, then praised the local scene. 'Boise's always
a nice place to stop by on the way out,' Evan Lowenstein said, adding
that the city 'is actually far more beautiful than I expected it
to be. It's actually really nice, so happy to be here.' Mr. Alan
chimed in: 'Yeah, we've got some good people here.' Later, he asked
Boise fans to e-mail or call the station with questions for the
"The singers had actually done the interview in San
Diego a few weeks earlier. Mr. Alan himself has never been to Boise,
though he offers a flurry of local touches on the show he hosts
each weekday from 10 a.m. to 3 p.m. on the city's leading pop station...
"Via a practice called 'voice-tracking,' Clear
Channel pipes popular out-of-town personalities from bigger
markets to smaller ones, customizing their programs to make it sound
as if the DJs are actually local residents.
"'We can produce higher-quality programming at a lower cost
in markets where we could never afford the talent,' says
Randy Michaels [pictured above], the chief executive of the company's
radio unit. 'That's a huge benefit to the audience...'
"Mr. Michaels compares his model to McDonald's Corp.'s
franchise system. 'A McDonald's manager may get his arms around
the local community, but there are certain elements of the product
that are constant,' he says. 'You may in some parts of the country
get pizza and in some parts of the country get chicken, but the
Big Mac is the Big Mac. How we apply those principles to radio we're
still figuring out...'
"Clear Channel and its predecessor companies began installing
the technology in all its stations in the late 1990s, and linking
them together into a giant high-speed digital network to move digital
recordings around seamlessly. Gradually, the company started piping
major-market DJs into smaller cities. It even did the same with
some news stations, which used local reporters feeding information
to announcers in different cities, who would then send back their
to be put on the air...
Michaels "compares the radio shows to films, which wouldn't
be 'nearly as much fun if the camera kept turning around to show
you it was just a set. I don't know that the radio experience would
be as good if we said every five minutes, "By the way, I'm
not really here and I taped this 20 minutes ago." But that's
all part of the magic of creating entertainment.'"
This article is in today's issue of The Wall Street Journal.
If you're registered, you can read it online here.
have to sue each individual company..."
don't we as an industry, both broadcast properties and webcast
properties, simply state that we won't pay fees and we won't comply
with regulations...period? Let 'em know up front that no matter what,
we think it's crazy and we're not going to bother with it.
They'd have to sue each individual company or organization,
and to be frank that would be ludicrous...
||Scott Hawk, President
hell of a bill..."
It would be fun for you guys to guess how much money stations
still streaming owe. I imagine that AOL is going have one hell of
a bill for AOL Radio.
don't see how the arbitration panel could have allowed the CARP
fees to be based "per performance." Having once programmed a Classical
channel with 3-4 songs per hour, as well as an Oldies channel with
23 songs per hour, there is an obvious disparity there.
Will formats that play shorter songs like Oldies, Americana
and even Blues vanish from the 'Net as a result?
These new rules are very old-school, and (what a surprise)
cater to the money-hungry Enron-esque RIAA/CARP bigwigs.
If they really want to feed the MP3-sharing trend that is
growing exponentially, this is a *great* way to do it. I'm not sure
that's their intention, though.
should I pay twice as much?.."
Our programming approach has been to have a mass appeal rock
music station, targeting a geographic niche of
Connecticut. This has allowed us to generate significant local advertising...
The per song formula will be a substantial burden, especially
when applied retroactively to the months when we had little or no
advertising. However, my biggest question with the proposed fees is
this: If the RIAA formula is per song, per person, why should I pay
twice as much per song, per person as a broadcaster?
||Randy Borovsky, President
is the NAB?.."
Where is the NAB during all of this? Their silence has been
the logging requirements and the rates, why bother to blaze new
Where are the privacy advocates? We are to log and report each
and every unique listeners EXACT listening habits (log on and off
time as well as unique ID) so as to pay the fees? Sounds like we are
handing quite a database as well as a check to the RIAA. I think we
will bill our research company from this day forward for exact data.
One thing that should be taken into strong consideration in
regard to the RIAA copyright attempt is the fact that they
deliberately spared the commercial broadcasters from the outrageous
fees. Broadcasters were allowed a much cheaper rate.
WHY? You know why! The big radio corporations are most likely
in it with the RIAA (publicly or otherwise). Radio wants to totally
control the audio-only commercial playing of music...
It's not going to stop here. This battle will rage for the
next 10 years. Quite honestly RIAA won't stop me from broadcasting
FREE. As with everyone else, I will find a server somewhere in the
world that will stream my audio. The publicity that will follow this
RIAA attempt will in the long run attract attention to the Internet
broadcaster. Attention we need!
Unless we’re all incredibly naïve, how can we be surprised
that the CARP recommendations embrace the views of the recording industry’s
deep-pocket members? The Enron Syndrome is hard at work here, and
that still-expanding scandal should have taught us all by now how
the decision-making process really works, just in case there was ever
The corporate and industry-group chieftains hand over their
fat checks to the political parties and their minions, and are then
permitted to dictate what governmental policy will be.
Enron may be bankrupt, but the corrupt system of paid-for
political privileges, undue influence and secretly-granted “favors”
that it represents is still very much alive and well, and more vigorous
than ever. The RIAA and its members know that the politicians will
take their money and then do as they are told, which includes leaning
on the bureaucrats when necessary to ensure that their “special friends”
get what they paid for. This will continue to be the reality as long
as we allow cash-and-carry politics in this country.
outer space on this one..."
As a non-industry type who is troubled the CARP ruling purely
because I enjoy listening to out-of-area music stations over the 'Net,
I am totally baffled by this matter.
What ever happened to the days when record companies were
falling over backwards to have their songs exposed to as many people
as possible? Is the RIAA and/or the government now seeking to restrict
consumer access to new music by forcing law-abiding webcasters to
The complete absence of logic in this situation just blows
my mind, and hopefully the CARP ruling will be swiftly reversed. Perhaps
radio stations should tell the record companies that they will stop
adding any new songs until the issue is dealt with in a satisfactory
manner. A few months of featuring recurrents only in the music rotation
might even help ratings.
The RIAA may have had commercial reasoning on its side on
the Napster issue, but they are way out in outer space on this one.
play your...song for $0.25 a performance..."
Heard this today from a MAJOR radio station...
"Our strategy will be to launch a sister stream...not a rebroadcast...and
then tell the labels, "Hey we'll play your new Madonna song for $0.25
a performance...how many would you like? Oh, and by the way, we like
to try out new music on our stream before we add it to our station's
A topic not discussed is the effect on web sites that program
what might be call "fringe" music -- in my case Classical, but also
folk, country, jazz, and other forms that make up single-digit portions
RIAA sales picture.
Not only do blanket fees presently collected from broadcasters
fail to be distributed equitably (or at all) to those who make the
recordings, but with smaller listener bases, streaming web sites will
have a much harder time surviving if they have to tack on this new
fee to their advertising rates. And those that don't have advertising
will have outrageous expenses with no income.
Some classical music lasts over an hour. How can anybody ethically
charge for 15 "songs" in this case?
ClassicalMusicDetroit.com...will be an endangered species if
the proposal is accepted.
How do Americans effectively stop this erosion of their cultural
Jim Lambert's comment that webcasters should buy wireless microphones
to qualify their programs as broadcasts is amusing. On a more serious
note, however, his point raises a reasonable question.
If "broadcast" includes low-power FM stations, wouldn't it
be feasible for pure webcasters to put minimal investment into establishing
low-power stations at various locations just to qualify for the broadcast
rate? Or to enter into cooperative arrangements with existing stations
to pick up their transmissions?
And is it permissible for ad-insertion type technology to
be used to tailor the non-music portion of the program for a web audience
while simulcasting the music portion, or would that make it a separate
||Feb. 27-Mar. 3, 2002
Music Week 2002: Toronto, Ont., CA
||Mar. 1-3, 2002
Conference and Expo for Internet Streaming: Rosemont,
||Mar. 14, 2002
Annual Bayliss Radio Roast: New York, NY
||Apr. 5-8, 2002
Education Association 2002: Las Vegas, NV
||Apr. 6-11, 2002
2002: Las Vegas, NV
||Apr. 23-26, 2002
Media West 2002: Los Angeles, CA
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