Some 70 million Americans currently listen to online radio each month, according to Nielsen Media Research and a Bridge Ratings study. And many independent artists have come to rely on it as a key way of gaining exposure for their music that they would not otherwise get through commercial broadcast radio. But just how many webcasters (particularly nonprofits and small organizations) will be playing music in the near future — and the diversity of styles that will be heard — may well depend on the outcome of a currently raging battle royale over Internet royalty rates.
In an effort to prevent what they foresee as the demise of Internet radio and the stifling of diverse and independent (1).jpg)
musical voices, U.S. Reps. Jay Inslee (D-Wash.) and Don Manzullo (R-Ill.) have filed a.jpg)
bill to nullify a recent decision by the Copyright Royalty Board (CRB) — a panel of three judges who oversee sound recording royalties paid by Internet radio services — that would significantly raise the rates that webcasters pay to copyright holders for streaming songs.
THE CRB’s action in March would increase the royalty fees paid by webcasters by 300-1,200 percent, effective July 15 and retroactive to last year. Branding this “a Titanic rate increase [that] is simply untenable for many Internet radio broadcasters,” Inslee, a member of the House Energy and Commerce Subcommittee on Telecommunications and the Internet, maintains “You can’t put an economic chokehold on this emerging force of democracy. There has to be a business model that allows creative webcasters to thrive, and the existing rule removes all the oxygen from this space.”
Noting that “the Internet has provided us with amazing opportunities to enjoy music,” Manzullo says “this unfair action by the CRB threatens to take it all away.” In contrast, he says that the Internet Radio Equality Act (H.R. 2060) that he and Inslee are sponsoring “overturns the huge rate increases and sets up a system that is fair to webcasters, web users and the artists whose music we all enjoy. And, most importantly, it will keep music playing on the Internet.” According to its chief sponsors, H.R. 2060 would effectively provide royalty parity for Internet radio providers by applying the same royalty rate-setting standard to commercial Internet radio, as well as satellite radio, cable radio and jukeboxes. A transition rate of 7.5% of revenue would be set through 2010.
The denial late last month of a motion for a rehearing filed by webcasters — including National Public Radio (NPR) and the Digital Media Association (DiMA), among others — has galvanized efforts to overturn the CRB decision. Many webcasters, listeners, labels, and independent artists who fear that the ruling will result in there being far fewer avenues of exposure for their music (as royalties owed may exceed revenues for many webcasters) have joined forces as part of a SaveNetRadio coalition.
“The coalition believes strongly in compensating artists, but Internet radio as we know it will not survive under the new royalties,” according to a statement posted on its Web site, www.SaveNetRadio.org. “Before this ruling was handed down, the vast majority of webcasters were barely making ends meet as Internet radio advertising is just beginning to develop,” the coalition maintains. “Without a doubt, most Internet radio services will go bankrupt and cease webcasting if this royalty rate is not reversed by the Congress, and webcasters’ demise will mean a great loss of creative and diverse radio. Surviving webcasters will need sweetheart licenses that major record labels will be only too happy to offer, so long as the webcaster permits the major label to control the programming and playlist.”
The Roots Music Association, a coalition member, has apprised its members that “Should the rates go unchallenged and unchanged, the industry will see mass closure of Internet broadcasting services overnight. The potential impact on the independent roots music industry could be devastating.”
On the other side of the issue, SoundExchange, a nonprofit organization that collects sound recording performance royalties and distributes them to copyright owners and performers, has hailed the CRB judges’ decision.
SoundExchange, which collected approximately $15 million in royalties from webcasters in 2005 and has been designated by the U.S. Copyright Office (which appointed the three-judge panel) as the sole administrative entity for the collection and distribution of performance royalties that are owed artists and labels by webcasters (a selection that was reaffirmed by the copyright judges), questions the dire projections about the future of Internet radio advanced by the SaveNetRadio coalition in the wake of the CRB decision.
John Simson, its executive director, recently wrote a letter to SoundExchange members and friends in which he referred to what he considers “hyperbolic claims of the demise of Internet radio.” He considers the CRB’s ruling a victory for performing artists and record labels. Simson views the CRB’s decision as “validation of three basic principles: 1. The music industry is changing, dramatically. What was once a CD-only business has evolved into a multi-platform consumer offering – from streaming to cell phones to mp3 players and more. With these changes come new challenges to assure a fair and competitive marketplace. 2. Webcasters and simulcasters are in the business of providing a product –music – to consumers. The people who create the product –the artists and labels – should be fairly compensated in a manner that reflects the value of their work. 3. All the participants in these proceedings are interdependent. We are all in this business together. One can’t succeed without the other. Assuring fair treatment for all stakeholders in this dynamic landscape is critical.”
On its Web site, SoundExchange asserts that “The talents of music performers are the main attraction and reason why people listen to online radio. They should therefore be fairly compensated for the value they provide these businesses.”
While not disputing that contention, independent artists like singer-songwriter Jay Einhorn of Evanston, Illinois believe that “the CRB ruling will have the perverse and unintended effect of devaluing artistic property.” In a note posted to a listserv last month, Einhorn contends “My music is worth nothing if no one hears it. Internet radio has a valuable niche in the musical marketplace for providing exposure to new musicians whose work has no hope of access in the more mature broadcast market. With very few exceptions, regular broadcast radio stations can’t even begin to consider musical products that don’t have a lot of money behind them. The effect of the CRB ruling will be to shut down the growing edge of the musical marketplace.”
SoundExchange acknowledges that “some webcasters have made this claim, which would be specific to their business models, but that does not negate the need to be fair to the creators of the music these webcasters depend on. … The webcasters’ consistent forecasts of doom have yet to materialize, and we should reserve judgment this time around as well.”
Jonathan Potter, DiMA’s executive director, disputes SoundExchange’s position. Asserting that HR 2060 “may be Internet radio’s last best hope,” Potter contends “The Internet Radio Equality Act sets a new standard for setting royalty rates that will level the playing field for Internet radio, avoid unfair bankruptcies that eliminate royalties currently being paid to recording artists and record companies, and removes the unfair advantage enjoyed by our competitors in the satellite radio community.”
Decrying the CRB judges’ failure to consider what he calls “the public service aspect of more than 800 stations across the country when it made its recent decision,” NPR spokesperson Andi Sporkin notes that for more than 30 years the Copyright Act “has recognized that public radio has a very different mission from commercial media and cannot pay commercial-level royalty rates.” He believes that H.R. 2060 “will provide a long-term resolution that is fair for all sides.”
In a recent e-mail to listeners, Mark Lam, CEO of Live365, an Internet radio service provider, asserts: “Should this ruling stand, many of your favorite stations will be silenced. You will find Live365’s 260 genres reduced to the same meager, homogenized list carried on AM/FM radio, because the unfair rates would drive webcasters in niche genres with unique content unavailable elsewhere out of business.”
Calling the Internet “our last remaining outlet for free expression,” Hudson Valley, New York-based singer-songwriter Fred Gillen Jr. asks: “Is there a single song against the war in Iraq on mainstream radio?” Gillen, who also performs with the group Hope Machine, says: “It is so obvious to me what the motivation for this ruling is. Soon, the only Internet radio left will be corporate-backed by companies which will participate in the agenda. I can’t believe anyone is actually fooled into thinking that this protects independent artists.”
Larry Hoyt, a folksinger-songwriter who hosts “Common Threads” Sunday afternoons on WAER in Syracuse, NY, envisions a new business model emerging for what we now call Internet radio and suggests a new name like Internet Free Streaming. As Hoyt sees it, independent artists who want more free exposure will make their recordings (or some samples of their recordings) available for free streaming on the Internet by any and all, while artists who want to protect the possible royalties they might receive from webcasting won’t. Asserts Hoyt: “In reality, only the major labels and the major independent labels will monitor and/or spend any money to prosecute violators. Most smaller labels and true independents will welcome just about any exposure they can get.”
Editor’s Note: In my view, independent recording artists and labels deserve to be fairly compensated for their work. However, I am leery of corporate interests (and those that emulate them) that claim to be fighting to protect the rights of the “little guy” (read that as independent artists and labels here). Ideally, I’d like to see some kind of workable compromise reached wherein independent artists and labels get more royalties without potentially crippling some of the nascent, smaller independent, non-commercial webcasters. However, the recent CRB decision is a wrongheaded one motivated primarily, it appears, by corporate greed and a desire to control the Internet marketplace. This will only serve to further limit our choices and the voices that we get to hear. I’m not sure how this can be good for independent artists whose music is outside of the commercial mainstream. Although it is difficult to gauge how having one’s music streamed on Internet radio stations contributes to attendance at concerts and CD sales (which are down markedly, and paid downloading of tracks may become more prevalent). However, I believe it does have an impact that is potentially greater than any additional royalties one might receive from the playing of recorded songs by what may be a shrinking number of Internet radio outlets if the decision to set what many webcasters consider to be onerous royalty rates stands and the dire projections of the demise of Internet radio come to fruition. – Michael Kornfeld
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