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logo In light of recent news, we're re-focusing the agenda for our annual RAIN Las Vegas Summit, which will be held all day on Monday, April 16th at the Renaissance Hotel in Las Vegas. More details are coming, but in the meantime, scheduling and location information is here. Please plan on joining us if you can!

Our original coverage of the Copyright Royalty Board royalty determination, including a table of the new rates, can be found in our March 2 edition here. An editorial dealing with Copyright law issues can be found in our March 16 edition here. [A PDF of the decision is available here.]

news flash
Headline: "News Flash: R&R reports CRB agrees to rehearing"
According to Radio & Records' Washington, DC-based editor Jeffrey Yorke, "T
he Library of Congress's Copyright Royalty Judges, the panel that on March 2 rendered a new rate schedule that substantially raises the fees Internet radio stations will pay for streaming tunes, has agreed to hold a rehearing sometime in the future.

"In a brief released Tuesday afternoon (March 20), the judges accepted motions filed by [various participants]... The judges said responses to the motions may be filed no later than April 2 and that parties may file written arguments on the issues raised in the motions.

"The reaction to the panel's rate schedule
has been wide-ranging and highly critical of the dramatic rate increase... Commercial and public broadcasters were alarmed by the increase, and many are worried that the fast-growing Internet broadcasting industry could be snuffed out before it becomes healthy enough to make the considerable payments that would be required. Numerous industry observers expected a rehearing, but few expected it to be granted as quickly as this week..."

Read the full piece at RadioAndRecords.com


...
RAIN analysis
...
According to our contacts in Washington, the above story misinterprets the order that was released by the CRB. The fact that they're accepting responses to the motions that were filed on Monday is not the same thing as agreeing to a rehearing.

They only set a date - April 2 - by which comments on the motions are to be filed. Once the comments are filed, then the Board will decide what to do - modify their decision, hold more hearings, or leave the decision the way it is.

Yesterday evening's cNet News.com's coverage of the order (here) made the same error in interpretation. The judges haven't granted a rehearing yet.
-- KH
...


Headline: "In rehearing motions, a potential flaw in CRB royalty finding"
From attorney David Oxenford's BroadcastLawBlog: "
Monday was the deadline for the filing of Motions for Rehearing of the decision of the Copyright Royalty Board decision on Internet radio music royalties for 2006-2010...

[See RAIN coverage on the CRB's determination here]

"In motions filed today, many of the webcasters challenged specific aspects of the CRB decision. And at least one party raised an issue that seems to contradict the very foundation of the Board's decision. Plus, in virtually all of the rehearing motions, the parties noted that additional issues may be raised on appeal to the U.S. Court of Appeals, which do not need to be filed for several weeks.

A potential flaw in basis for CRB decision
"In the Motion filed by the Broadcasters' group [including the largest U.S. broadcast group Clear Channel], it  was argued that an expert witness offered by SoundExchange, in the proceeding which is now underway to determine royalty rates for satellite radio, contradicted some of the basic assumptions used by SoundExchange's witness in this proceeding.

"If the assumptions used by SoundExchange's expert in the satellite proceeding were to be applied in this case,the royalties would actually decrease from those that were in effect before the Board's decision. The assumptionsused by the expert in the satellite proceeding seemed to confirm the claims offered by the webcasters' witnesses in this proceeding...

Webcasters address other concerns
"The appeals of the DiMA [Digital Media Association] group
, representing large webcasters, and the appeal that I worked on for the small commercial webcasters, both addressed the issue of the $500 per channel minimum fee which, if it was to be paid on literally every unique channel streamed by a service, could mean that some webcasters could pay hundreds of thousands or even millions of dollars as a minimum fee. Some webcasters (like Pandora) serve up a unique stream for every listener.

"Virtually all of the parties also addressed the question of whether most webcasters could even compute a royalty based on a per song per listener basis. This is especially true for retroactive payments, when many webcasters did not keep such records...

"The small webcasters also asked the Board to reconsider its decision not to recognize a class of small webcasters that would pay royalties based on a percentage of revenue. As the small webcasters are pure webcasters whose whole business is predicated on webcasting, they could pay royalties on their entire revenue, negating some of the bases for the Board's refusal to adopt a percentage of revenue royalty.

"SoundExchange itself asked that the Board make clear that the royalties apply not only to Internet transmissions, but also to transmissions that may be received over a cell phone. SoundExchange contended that the Board's decision was clearly meant to encompass  such transmissions, but some language in the rules that were adopted appeared to raise questions about whether mobile phone transmissions were covered.

"The process for considering these motions is not clear under the Board's rules. So we'll see when the Board rules on these motions, and what is next for the Internet radio industry."

David Oxenford is a Washington, D.C.-based partner with Davis, Wright, Tremaine who represents small commercial webcasters. Read the full version of this entry in David's BroadcastLawBlog here.

 
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PETITION UPDATE: Please keep Internet radio alive!
was at over 29,905 signatures as of 2PM CT today (up from 19,400 last Friday). Today's sample signature:
# Name Thanks to Internet radio, have your CD (or music download) purchases (01) gone up, (02) stayed the same, or (03) gone down? Do you feel that the existence of Internet radio helps or hurts the music industry? Other comments
26160 Vickie Hackney   02 How can it possibly hurt the music industry? That's insane logic. I listen to internet radio during the day and if I hear something I really like, I either go out and buy the CD or purchase it from iTunes or Amazon. In my opinion, internet radio only helps the music industry. If I lose internet radio, my music purchases will bottom out to nearly nothing. Times have changed. I no longer buy music without a good listen and internet radio provides me a listening format while I'm at work. If I lose internet radio, the music industry loses my business altogether.
Internet radio listeners are currently signing this petition to Congress at the rate of several hundred listeners every hour -- with most of them adding insightful comments about their music purchase behavior!  (Read more comments here.) If you'd like to link to this petition from your website, you'll find tools (banner, buttons, PSAs) and links at RAIN's SaveTheStreams.org. Another petition with tens of thousands of additional signatures is available, if you prefer its design, here.
 

Headline: "NPR, Clear Channel, and DiMA pick targets in CRB appeals"
From the Washington Post: "A wide array of broadcasters and online companies on Monday challenged a ruling from a panel of copyright judges that they say could cripple the emerging business of offering music broadcasts over  the Internet.

"Clear Channel Communications Inc., National Public Radio, and groups representing both large and small companies providing music broadcasts online were among those asking the Copyright Royalty Board to reconsider key parts of its March 2 ruling... [RAIN coverage here]

"Jonathan Potter, the executive director DiMAof the Digital Media Association, which represents major online companies affected by the decision, asked that the judges specifically allow a per-tuning-hour approximation measure for paying the royalties...

"A group of commercial broadcasters including San Antonio, Texas-based Clear Channel, the largest radio company in the country, also asked for a reconsideration of key parts of the ruling, saying that the methods used to calculate the fees were faulty...

"NPR said in its filing that it also intended, in due course, to appeal the overall decision by the copyright judges to the U.S. Court of Appeals for the Federal Circuit in Washington."

Read this entire Washington Post story online here.

 
Headline: "Salon: Pat rulings haunt new debacle, clutter a clear course"
From Salon.com: "It was the best of times, it was the worst of times for independent musicians, music labels and their fans earlier this month in Washington.

"In two distinct rulings, one by the FCC, and the other by the Library of Congress' Copyright Royalty Board, the U.S. government took a firm stand in favor of small artists and music labels — and local programming over media conglomerates — even as it drove a regulatory stake through the heart of a fast-growing and popular medium for niche and independent music: Internet radio.

"The two rulings... painted a picture of a federal government at odds with itself about how to balance the rights of the public with those of artists, copyright holders and media conglomerates. But with music fans and artists increasingly disenchanted with the status quo and newly empowered by technology, the squabbling over royalties... may already be causing a paradigm shift that will transform the music industry...

CRB ruling problems rooted in DMCA
"The CRB decision
landed with a dull thud on the desk of Tim Westergren, CEO of the Music Genome Project and Pandora,...

"Kurt Hanson, president of Web broadcaster AccuRadio, found himself and his webcasting service in a similar boat...

"Hanson, who had been party to the talks with CRB, testified in favor of any formula for royalty payments that would allow small webcasters, many of whom see little or no profit from their accuradiooperations, to continue to do business. But those arguments fell on deaf ears at theCRB. 'Apparently the judges interpreted their assignment as figuring out the rate in a hypothetical world, so they looked to economic theorists rather than real-world examples from the 2006 advertising market,' he said.

"John Simson, executive director of SoundExchange (pictured), said that his organization is sympathetic to the challenges faced by 'small guys' like Hanson and Westergren, who face big increases in the per-song costs of streaming. However, he stood by the CRB's john simson ruling and the 'willing buyer/willing seller' formula,...

"But others argue that the tortuous legal process that led to the CRB ruling was costly enough to force out all but the largest and most well-heeled parties. The effort to set digital performance royalties for webcasters included 48 days of testimony, 13,288 pages of transcripts, 192 exhibits and 475 entries of pleadings, motions and orders, on top of written direct statements and rebuttals from the parties involved, according to the CRB...

"But the punishment-reward equation is changing as the copyright owners bear down, noted Oxenford, who represented webcasters in the CRB negotiations. The whole purpose behind the DMCA, he explained, 'was to set up a statuatory royalty because Congress recognized how hard it would be for dmca any Internet radio operation to negotiate with every copyright holder for a piece of music. Now, with the royalties, the only way to operate is to do what Congress thought they couldn't do — go after every major independent unsigned band.'

"Even Simson acknowledged that consumer behavior is shifting from buying CDs to consuming music online, a change that makes streaming more valuable in and of itself...

Appeals and repercussions
"The dispute
over webcasting royalties isn't over. Appeals of the royalty schedule have already been filed with the CRB and will be considered during a 60-day review period. The process also allows for arguments before a federal appeals court after the new rate schedule has been finalized, and there's always the possibility for a grand compromise between webcasters and SoundExchange that will remove the most onerous elements of the CRB's decision, experts say.

"Should the CRB, SoundExchange and webcasters fail to agree on a compromise, the CRB's ruling may be remembered as a kind of Pyrrhic victory in which SoundExchange won the battle over webcasting royalties, but lost the war for the next generation of salonmusic listeners by snuffing out Internet radio.

"And there's another danger for artists and even SoundExchange itself, said Oxenford: 'If you end up pushing out all the folks who are legally operating Internet radio because it's not an effective business model for ad-supported music, then the only ad-supported Internet radio that will exist will be the pirates. And they don't pay royalties.'"

Read the entire article at
Salon.com.

 

 


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    Kurt and Paul, this is deep background -- don't quote me!

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RAIN coverage of the 2002 CARP royalty rate ruling

Feb. 20, 2002 CARP rec.'s .07-cent fee for radio webcasts, twice that for 'Net only
Feb. 21, 2002 Industry reacts to CARP royalty rates for Internet broadcasts
Feb. 25, 2002 Industry still stunned by CARP arbitrators' recommendation.
Feb. 27, 2002 CARP arbitrators gave RIAA more than they asked for!
April 18, 2002 Mercury News editorial
April 22, 2002 Day of Silence announced
April 23, 2002 More support in Congress
April 25, 2002 Day of Silence is ON!
April 29, 2002 DOS in USA Today, NY Post
May 1, 2002 Day of Silence
June 20, 2002 Librarian Decision
June 24, 2002 Cuban on Yahoo deal
July 11, 2002 Labels to Net radio: Die Now!
October 1, 2002 Forbes coverage (scroll down)
November 15, 2002 Small Webcasters Settlement Act
December 16, 2002 Small commercial webcaster license


x
With the royalty crisis facing the industry, this year's RAIN Las Vegas Summit '07(during NAB 2007 in Las Vegas) may be the most important ever.

The all-day Summit is scheduled for Monday, April 16th, (with our customary cocktail hour following), just steps from the Las Vegas Convention Center at the Renaissance Las Vegas Hotel. (That's the Convention Center on the left in the photo above.)

Over the next few weeks
, we'll announce an updated meeting agenda and give you a run-down of scheduled guest speakers.

We hope you can join us!
xx
 
Upcoming conferences
March 19-22 Video on the Net: San Jose, CA
March 22 Bayliss Roast: New York, NY
April 14-19 NAB 2007: Las Vegas, NV
April 16 RAIN NAB Reader Summit: Las Vegas, NV
April 24 Leadership Music Digital Summit: Nashville, TN
September 26-27 NAB Radio Show: Charlotte, NC
November 4-6 NAB European Radio Conference: Barcelona, Spain