Daily news and commentary
on the key issues involving radio and the Internet
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.]
According to Radio & Records' Washington, DC-based editor Jeffrey Yorke, "The 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..."
... 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 ...
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
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.
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
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
"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:
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?
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.
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.
"Jonathan Potter, the executive directorof 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...
Read this entire Washington Post story online here.
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 operations, 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 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 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 music 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.'"
the royalty crisis facing the industry, this year's
RAIN Las Vegas Summit '07(during
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 updatedmeeting agenda and give
you a run-down of scheduled guest speakers.