Wednesday, June 27, 2007

Free Speech, Free Music, Free People

Fairness Means Fair For Who?

Whatever Happened To Markets?

Michelle Malkin and Hugh Hewitt have noted the following bit of fluffy barking from Senator John Kerry (He served in Vietnam) talking about the "fairness doctrine"....

Hewitt points out that when you follow Trent Lott by over a week you're not exactly cutting edge, on the cusp, leading any thing... Kerry is no fool. He knows it's much safer to lead from the middle of the pack. Heck, even Diane Feinstein has come out in favor of putting the leash on media in the name of fairness... and to pull Talk Radio Leftward but not Broadcast TV Rightward. (Does that mean she has finished her Bill of Censure for Bill Clinton? She has been working on that for almost 10 years... Probably not.)

The question I have to ask and probably answer: "Where does the Internet Fit?" Is it written or spoken or video?... Yes. Its all three.

Is there a media of journalists, publishers and reporters or is it just the mindless gaggle of the bleating crowd?...(
Do gaggles bleat? Probably not. This is a mixed metaphor)

Yes again
. How will the politicians control it and us...or us and it?

Short answer: Royalties.

Yesterday was national internet radio silence day. Did you notice? You should have. Like blogging, reporting, citing and's something we all do. Well, its a part of what we're doing in trying to get our arms around something that is growing and evolving and changing all at the same time.

If radio and video can be restricted in its digital format, why not the written word? Who owns the medium, the ideas, the copyright? If the stream is getting paid by the advertising dollars that appear along side, on top of, in the middle and as a tag-a-long, then how is the revenue shared?

Now we are getting somewhere... Politicians understand money and regulations... They also understand how they can pick winners and punish losers. They like to choose which is which and who is whom. They prefer to work with the large and established. Its just easier (less work) to manage big bunches of anything than it is to respond to thousands and thousands of small units. Look at how they cozy up to the unions for the money and the appearance of doing good for the many even as they sell the workers into union slavery. Look at the family farmer... Nothing got done until the family farmer was replaced by major agri-business and could donate millions as well as sell billions in crops around the world... Now Congress must save the farmer...and distribute lots of goodies to the biggest of the big.

Look at what has happened to the broadcast medium since Congress let corporations own multiple outlets in a single market... "Robot radio" arrived with drop-in news and weather phoned in from a distant location to an empty building with a radio mast. One DJ spinning in circles being a personality in multiple cities all at the same time... Canned formats sliced and diced by consultants and marketing wizards so that the audience gets bored and wanders off... Bland-bland-bland so that NOBODY gets offended. No more regional hits, no regional personalities, no regional tastes, flavors or interests... Why else would the numbers be dropping at every measure? Why would the ad dollars be moving to the internet as a bigger portion of their ad buy...? One Size-Fits-Most just isn't very satisfying.

Jason Fry at the WSJ began covering this story some years ago. It got hotter, more urgent and more interesting in early March when

Last week the Copyright Royalty Board released a ruling proposing new performance royalty rates for online radio stations. An online radio station would pay .08 cent per song per listener for 2006 (the rates are retroactive), .11 cent in 2007, .14 in 2008, .18 cents in 2009 and .19 cents in 2010. Seems like little enough, but it adds up -- and this small change is a big change for small Webcasters. Under a deal brokered in 2002, small Webcasters had met their royalty obligations by paying artists and record labels 12% of revenue, but the new rules would do away with that exemption.

... arguing that even well-run Net-radio stations would see performance royalties eat up all their annual revenue -- and that's before the need to pay royalties to composers. (Performance royalties and composer royalties are separate -- the former are paid to artists and record labels, while the latter are paid to songwriters and music publishers.) "Terrestrial" broadcasters who stream radio would also pay more, and public-radio stations would no longer be able to pay a flat fee, as agreed to in a previous deal.

"Left unchanged, these rates will end Internet radio," co-founder Tim Westergren warned on Pandora's blog6. (Pandora, a combination streaming-audio service and recommendation engine, could be particularly hard hit by the new rules: As a multichannel operator, the service would have to pay $500 per channel that has a certain number of listener hours. Pandora has 6 million users, each of whom can have up to 100 channels. You can see why the company is worried.)

... it makes more sense to view what's happening now as hardball negotiating than as an endgame. Besides the possibility of striking a deal, Webcasters can appeal, and Internet-radio fans are signing petitions and writing letters to their representatives. It isn't clear if Congress will step in before the appeals process runs its course, but lawmakers have taken notice: Rep. Edward Markey (D., Mass.) said in a hearing last week that "this represents a body blow to many nascent Internet radio broadcasters and further exacerbates the marketplace imbalance between what different industries pay." Then there's the possibility that the furor could spill over to the proposed merger between Sirius Satellite Radio and XM Satellite Radio. Those companies have argued they should be allowed to team up, in part, because satellite radio competes with Internet radio.

... Of course not -- because that makes no sense whatsoever. Treating the two as different is missing the radio forest for the Internet trees; in a sane world, lawmakers would treat radio as radio, regardless of how it's delivered. For the recording industry's disingenuous analysis of the law governing radio and royalties, read our 2002 Real Time7, which preserves part of a Recording Industry Association of America FAQ that's been taken down. (The recording industry maintains that Net-radio operators aren't in danger of going under this time either, thanks to steadily increasing advertising revenues.)

All this aside, I've become a fan of Pandora since writing about it here8, and perhaps my recent experience with the service will serve as a warning to the recording industry of what it could be losing.

Pandora has become one of the most-important ways I find new music. It's a very simple service: You visit its Web site and tell it a handful of songs and/or artists you like, and it generates a streaming-audio channel for you, which you then refine by telling it you like a song, dislike it or are tired of it. If I like a song, I give it a thumbs-up, which simultaneously prompts Pandora to change my music channel to take that into account and bookmarks the song for later. (AJ- I, too, am a big fan of Pandora. It is so much better than much of the other music feeds. It is even better than broadcast radio over the internet i.e. and from the Bay Area.)

... that virtuous circle sure sounds like the old "radio is free promotion" bargain underlying traditional radio -- for which performance royalties have never been paid in the U.S. Yes, there are technological differences between terrestrial radio and Net radio, notably the ability to guide what's played, skip songs and keep track of what I like. But those differences seem to work to the advantage of artists and record labels: With Net radio, I'm more likely to hear songs I like, bookmark them and buy them. One listener's experiences aren't necessarily grounds for extrapolation, but this bargain seems like a pretty good deal for the recording industry, one it ought to be careful about altering.

That was in March. In mid-June the WSJ had the following story about internet radio racing to achieve equal footing with broadcast radio.

Internet radio, which can draw on vast troves of music from around the world and customize them to a listener's personal tastes, is growing. While ratings for traditional radio broadcasters have been lackluster, Internet radio listenership in the U.S. has risen to 29 million a week, up from 20 million three years ago, according to Arbitron Inc. and Edison Media Research.

... the nascent industry has yet to capture the biggest prize -- portability. Some halfway solutions exist, such as music devices that allow people to stream Internet radio on speakers, or software that allows technology buffs to access Internet radio from their phones. But results can be glitchy, expensive and technically against the terms of contracts with mobile-phone service providers. Now, start-ups and giants are jockeying for position in mobile Internet radio, in a race that could rearrange the business model of music and broadcasting.

Most major radio companies are moving aggressively onto the Web and other platforms such as mobile phones. Web sites from radio giant Clear Channel Communications Inc. now account for some 20% of all online radio listening, according to J.P. Morgan.

The broadcasters say listeners want to connect with the hosts and formats they know, whether it be online or over the airwaves. "That's a big distinction that we have, marquee value and brand name," says Dan Mason, head of CBS Radio. (AJ -If That is so, why does big name-big corporate radio sound so damn bland and boring? Why play the same crap in every market around the country-?)

But portability could make Internet radio operators a greater threat. Internet radio "will sweep into the car, and the traditional station is going to have to think about how they reprogram to compete," says Jonathan Jacoby, an analyst at Banc of America Securities.

Companies like Sprint Nextel are vowing to improve WiFi's reach down the road. Until they are closer to that goal, however, many Internet radio providers are skipping the car for now, focusing instead on other portable devices.

That's Pandora's strategy. The company, known for a technology that tries to learn the musical qualities a listener likes and serve up songs accordingly, is working with Sprint Nextel to deliver its service to users of high-speed data phones for $2.99 a month. Tim Westergren, the company's co-founder and chief strategy officer, notes the phone will already play Pandora through a car stereo using an adaptor, and adds he also envisions a future where Pandora is integrated alongside the car radio tuner.

Slacker says it has another advantage. Most Internet radio operators are currently facing a major increase in the royalty rate they owe to artists whose songs they play, an increase so dramatic that royalty rates in some cases eclipse the company's total revenues. Most operators, including Pandora, are complaining that the higher costs may put them out of business. They're busy lobbying Congress to change the recent rate increase, imposed by the Copyright Royalty Board, a Washington, D.C.-based panel of judges.

But Slacker says it already has a higher royalty rate built into its business model. Rather than paying statutory license fees, Slacker cut deals directly with record labels. Like satellite-radio broadcasters, Slacker will turn over an undisclosed percentage of revenue in royalties, rather than paying per song and per play.

Which brings us up to yesterday.... Again from the WSJ

Web broadcasters are planning to turn off their music for the day to protest higher statutory royalty rates payable to artists. Some of the largest services, including Live 365 Inc., Pandora Media Inc. and Yahoo Inc.'s Yahoo Music, are participating in the blackout, which organizer Kurt Hanson of online-radio service AccuRadio has dubbed "Day of Silence."

any online broadcasters say the new rate structure -- which will cost some of them several times their current total revenue -- will put them out of business. The new rates, announced in March, start at 0.08 cent per song, per play, per listener, retroactively starting in 2006, and rise to 0.19 cent by 2010. The fees start coming due July 15.

The industry held a day of silence on May 1, 2002, shortly after rates of 0.14 cents per song, per play, per listener were proposed. In June 2002, the Librarian of Congress cut those rates in half, but even that rate was prohibitive for some of the smaller broadcasters. Later that year, Congress passed a law allowing small Webcasters to pay a percentage of their revenue in royalties instead of the per-song rate.

This time, the Librarian of Congress has no authority over the rates, which were set by a panel of federal judges. Legislation has been introduced in Congress that would cut the rates.

Instead of paying the statutory rates, the online companies have the option of negotiating rates separately with each artist or label, but that can be a very time-consuming process.

So What happens on July 15.........?

I hate being manipulated by big time-boring radio or controlled for-my-own-good by Congress. I enjoy the new artists. I hate the lost years when all I heard as I traveled about was the same crapola. I like being able to find new music. I like having new artists and new songs presented to me on my time...

What do Sirius and XM satellite offer? Same stuff without advertising... If I knew what I wanted, it wouldn't be new... would it? That leaves me listening to their format, their choices, their selected music and entertainment... I may as well have Rhapsody or one of the cable providers music channels... You have to know the stuff before you know if you like it. You get no vote...just a big portion served luke-cold to eat or toss out...

What does this have to do with "Free Speech" and the "Fairness Doctrine".... Everything.

What drives the markets? The audience... Who is the audience? Who decides what is fair? The audience..... Right Wing Nut Job talk Radio is entertaining. They laugh at themselves and at the absurdity of their political opponents positions.

Their political polar opposites have recently lost several hundred million dollars growing more strident and more abusive in their personal attacks. They attack any who oppose them politically. They attack any who challenge them on-the-air, in blogs or in their policies. It is a personal, ad hominem, soul destroying assault that leaves no possible room to admit error without admitting one is unworthy of being classified as human being, American.... They lose money because outrageous assaults are only funny for a brief period as parody. When it serious; it's no longer entertaining. I don't want to listen or watch... Neither do many more individuals who make up an audience....

To solve this problem... dinosaurs -of both parties- have decided that the government must regulate what we shall find entertaining. If we dislike the crapola from the left, we must have it sprinkled in equal measure across our regular-rabid-right-wing-nut-job breakfast cereal....

They have also decided that we must-must-must listen to big name-big brand -boring radio and hear only those audiences that play what they and their focus groups have decided is good for us....

BULL..... Move the servers offshore...... bring Pirate Radio back......Bring us WiFi Pirates...... Sign the individual artists... Let us buy the big name boring recording industry and theyr big brand name outlets... Let the audience (Can we call us a market now?) decide..

We're not through with this internet revolution -YET-!!!

Computerworld has a good overview of the current Net-radio flap here.

For more, see the Broadcast Law Blog's coverage here and here.

From Wiki
Wikiedia offers the following additional info:

2007 Copyright Royalty Changes

In 2007, the United States Copyright Royalty Board proposed a rate increase in the royalties payable to performers of recorded works broadcast on the internet. This decision, retroactive to 2006, may undermine the business models of many Internet radio stations.

According to a report released in March 2007, under the newly proposed rates, annual fees for all station owners are projected to reach $2.3 billion by 2008. This figure is more than four times that for terrestrial radio broadcasters who, due to terms set forth in the 1998 Digital Millennium Copyright Act, are exempt from the additional royalties imposed on digital broadcasting outlets, which compensate the performers of recorded works. Both terrestrial radio and Internet/digital radio broadcasters are responsible for royalties collected by performance rights organizations (ASCAP, BMI, SESAC) on behalf of the composers of recorded works.

Many performers of recorded works have voiced their opposition to the Copyright Royalty Board's rate increases, fearing that the rate increases would cripple the internet broadcasters that have given them valuable exposure.

1 comment:

Gail said...

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