Today Is "Calendar Day"

Yes - I know. I have not posted anything in a while. It has not been for a lack of things to say - I actually have several postings worth of stuff about the royalty situation in my head that I would very much like to express. My lack of anything new here has been entirely due to a lack of time to write as things have been very hectic.

Today, March 29 is the much anticipated "calendar day" for my website and for Radio Dismuke. Turns out that Page-A-Day, a major calendar publisher, decided to feature my website as its March 29 entry in its 2007 Wacky Web Sites: 365 For The Weird & Wired calendar. Here is what the entry says:

"Listen to hits from before your grandmother was born at this site celebrating music recorded on 78 rpm records. Plus a link to Radio Dismuke - a 24-hour online radio station playing hits from the '20s and '30s."

Needless to say, I was thrilled when I first learned about this. This is incredible exposure for both Radio Dismuke and for the music I present. Radio Dismuke is all about bringing the wonderful but nearly forgotten music of the past to the attention of a new and hopefully appreciative modern audience. The calendar is sold in major bookstores all across the country and this entry is going to result in a great many people stumbling across and being exposed to the music for the very first time - and some of them will discover that they enjoy it and become fans. Whoever at Workman Publishing is responsible for that entry has my profound gratitude. You have helped the cause of this music finding its much deserved renaissance more than you will ever know.

On another note, for those who are new to Radio Dismuke or know of it only through this blog, coming up soon is the semi-annual broadcast Radio Dismuke conducts in conjunction with Nauck's Vintage Records, the world's largest and most prestigious auction house of rare vintage records. Kurt Nauck generously makes the records in his auction catalog of over 10,000 items available to the Radio Dismuke audience by playing specific records that listeners have requested to hear. Many of the records in Kurt's auctions are extremely rare and these broadcasts frequently are the first time that some of them have been performed in public in decades - and since all of the items are for sale and will be dispersed to various private collections around the world, there is a good possibility that it will be the last time some of them will be performed in public for a number of years to come. Normally, Radio Dismuke focuses on popular music and jazz from the 1925 to 1935 decade. During the Nauck's Vintage Records broadcasts, however, we feature everything from 1890s era wax cylinders to early rock and roll recordings from the very last years of the 78 rpm era. The program includes selections from a very wide range of genres - opera, classical, jazz, pop, ethic, rock, blues, country, spoken word recordings , you name it. The program features something for everybody - so I hope you will check it out. You can find out more information about it and the dates and broadcast times in your time zone by following this link.

I do plan on putting up additional postings regarding the royalty situation as time permits.

It Is Not Just Me Saying This

Harmed Copyright Holder Speaks Out

In my March 14th posting, I argued that the new royalty rates will, in fact, be harmful to artists and copyright holders whose works are less than famous or who focus on specialty genres by making it uneconomical for webcasters to play anything other than music which appeals to the widest and lowest common denominator. The result will be that such artists and recordings will be priced out valuable Internet radio airplay the same way that they have been priced out of AM/FM radio airplay for decades.

Well, it is not just some sour grapes webcaster saying this - one such copyright holder very nicely makes the exact same point. His name is Chris Thomas and he is the founder of Palo Duro Records, a small independent country label which focuses on Texas-based artists.

In an excellent posting to his blog, Thomas explains that, while he will be one of those collecting the higher royalty rates, the overall impact for his label will be negative as a result of the loss of the considerable exposure it receives from Internet radio airplay:

"Palo Duro has had the honor of having multiple projects in the Top 10, Top 5, and even #1 airplay position at many webcasters — something that, frankly, will never happen on a major-market terrestrial radio station. So while we technically have the most to gain economically from the new fee structure, the real-world effect will be just the opposite - webcasters that specialize in the cool and eclectic will simply disappear, and music fans everyone will return back to the stale 80s format and the same ten songs on your semi-local Hot Country favorite."
(Emphasis his)

As I mentioned in my previous posting, the task of the judges on the CRB was to look out for the best interests of all copyright holders - not just the desire on the part of the major labels to maintain their dominance and thwart emerging competition by means of bought and paid for legislation and governmental decrees.

Mr. Thomas also warns"

"This irresponsible government policy will push a tremendous growth opportunity and potential economic boom for the music industry to offshore locations immune to, and even defiant of, artist/label rights."

Indeed. Keep in mind that the webcasters who are impacted by this are those who choose to play by the rules and who pay royalties. The new rates will have no impact at all on the many pirate stations that are out there - except, of course, for the possibility that they may end up with lots of new listeners on their hands once the honest and legal broadcasters are forced off the air and into bankruptcy.

Mr. Thomas ends by saying:

"I’m angry. You should be, too."

I, of course, agree - except for the fact that "angry" is too mild of a word for what I think and feel about it.

An Unfree Market

How The Rates Harm Many Copyright Owners

A Radio Ink article that I learned about via Kurt Hanson's RAIN provides a quote from the Copyright Royalty Board's explanation as to why it settled on the per-song per-listener rate favored by the RIAA over the percentage of revenue model that other performing rights organizations use and for which webcasters argued:

“In reaching a determination, the Copyright Royalty Judges cannot guarantee a profitable business to every market entrant. Indeed, the normal free market processes typically weed out those entities that have poor business models or are inefficient. To allow inefficient market participants to continue to use as much music as they want and for as long a time period as they want without compensating copyright owners on the same basis as more efficient market participants trivializes the property rights of copyright owners.”

Aside from the implication that small webcasters such as myself are a bunch of mooching freeloaders, on the surface, this almost sounds reasonable. For someone like me who considers himself to be a free market sort of guy, it sounds like they are talking my kind of language.

Not.

For the judges to attempt to cloak their rationalizations using free market verbiage is absurd and drops context in a massive sort of way because the entire process they are part of and the results of their decision is the exact opposite of a free market.

In a free market, prices for goods and services are not determined by a handful of judges sitting on a government board.

In a free market, the government does not grant special privileges for one industry (i.e. AM/FM radio which does not have to pay such royalties) by exempting it from the laws and rules that all other market participants are required to play by.

In a free market, prices fluctuate according to supply and demand and whatever is going on in the wider marketplace as a whole. No commodity in a free market is guaranteed year over year price increases - let alone double digit price increases. (I sure wish I were guaranteed such year-over-year increases in my salary at work!)

The prices in the CRB's decision only fluctuate in one direction - up. And they do so without any consideration given to the larger marketplace conditions that the buyers might find themselves in at the time.

The task that was given the CRB and the standard that it was instructed to go by was: "to establish rates and terms that most clearly represent the rates and terms that would have been negotiated in the marketplace between a willing buyer and a willing seller."

I am sorry - but that is simply not possible to do. I don't care how fair, objective and conscientious the judges on the CRB might have been, nobody is in a position to come up with such a rate.

If the judges on the CRB were in a position to know what the exact market rate for copyright music ought be for every year through 2010 - well, I suspect that they might be spending their days doing something other than pouring over mundane and boring legal minutia because each of them would be richer than Bill Gates from playing the commodities market and having been right 100 percent of the time.

For a person to know what the market price for a given good or service in the year 2010 ought to be would require nothing short of psychic powers or omniscience.

What if we are in a recession in 2010 and the market for advertising dries up? What happens if Internet radio's audience decides it prefers podcasts instead? What happens if some yet-to-be-invented and bandwidth swallowing "killer ap" comes along and bids up the price of bandwidth making it significantly more expensive for webcasters to transmit and listeners to receive streaming audio?

Can things like this always be predicted in advance? Of course not. And yet every one of these and an unlimited number of other potential scenarios would have a profound impact on what a "willing buyer" would pay to a "willing seller" in an actual free market.

So, no matter what per-song per-listener rate the CRB comes up with, that rate is ultimately arbitrary.

Moreover - and this is very important - the rate is not merely arbitrary in a very wide and generalized sort of way, the rate is highly arbitrary as it is applied to any particular copyrighted recording.

Let's just assume for the sake of argument that, by some unknown magical and mystical means, the judges on the CRB do know with intrinsically guaranteed certainty that the per-song per-listener market price of a copyrighted sound record really ought to be the .0019 rate they have put forth.

If so - then the next question is this: which copyrighted sound recording?

Do the judges on the CRB actually mean to suggest that the market value of all copyright sound recordings is identical?

Let's just assume that the market value of a Brittany Spears recording is such that it can attract an audience large enough to make it worth a webcaster's while to pay .0019 cents per listener. Does it, therefore, follow that it would also be worth a webcaster's while to pay that same .0019 per listener to play a contemporary group that I happen to enjoy, Mora's Modern Rhythmists which plays 1920s and 1930s pop in an authentic style? (I need to state that Dean Mora was not told that I planned to write about him and one should NOT assume that he necessarily agrees with anything at all that I write about.)

If a recording by Mora's Modern Rhythmists has the same marketplace value as a Brittany Spears recording - well, how come Dean Mora's bank account is most likely nowhere near as large as Brittany Spears'?

The sad reality is, unfortunately, everybody has heard of Brittany Spears, including people such as myself who tries to avoid modern pop music as much as possible. How many people outside of fans of vintage pop and the early 1900s retro crowd has ever heard of Dean Mora?

Having to pay .0019 per song, per listener is a very expensive rate. Basically, that means a station that plays on average 16 songs per hour is going to have to fork over every hour in SoundExchange royalties alone $3 for every 100 listeners tuned in or $30 for every 1,000 listeners or $300 for every 10,000 listeners.

The problem for niche genres and lesser known artists such as Dean Mora is the fact that it is much easier for a station with 10,000 listeners to sell $300 worth of advertising than it is for a station with only 100 listeners to sell $3 worth of advertising.

Buying and selling advertising requires more than just the advertiser forking money over to a station owner to run ads. On top of the cost of the spots themselves is the time that both parties have to invest in the transaction. The buyer has to spend time shopping for stations, signing the agreement, paying the bill and getting the ad copy and/or recordings of the commercial to the station owner. And the station owner has expenses involved in bringing his station to the attention of advertisers.

An audience of 100 listeners per hour or less is simply too small for a serious advertiser to mess with. Even if the spots were being given away for free, the advertiser still has to pay the per-hour costs of the person who is responsible for buying and overseeing advertising campaigns. And there is simply no way that a station owner with only 100 listeners or less per hour can sell advertising at a rate high enough to compensate him for the time it would take in order to make sales calls and drum up the business.

The answer given by the judges on the CRB is that, since stations that small are "inefficient" it is entirely appropriate for their owners to face economic reality and go off the air. But if a station with an audience of 100 listeners per hour is playing recordings by artists such as Mora's Modern Rhythmists to a niche audience - well, exactly what is it inefficient at? The only "inefficiency" is the fact that a handful of judges have forced it to pay an arbitrary and artificially high per-song per-listener rate which might be appropriate for streaming a Brittany Spears type mass market recording but which is vastly priced above the market value of streaming artists who are unknown and are not able to attract a similar mass audience.

What an across-the-board royalty rate of .0019 cents per listener means is that the only recordings that are economically viable for a webcaster to stream are those recordings which are actually worth .0019 cents per listener - i.e., those recordings which can bring in a large enough audience to enable a station owner to generate enough revenue to pay the .0019 on top of all of his other operational expense plus, hopefully, some sort of profit. And since the only way a station owner can generate such revenue is by the economies of scale that can only be achieved with a large audience the effect of the CRB's across-the-board per-song per-listener royalty rate is to artificially price niche genres and all artists who do not have a mass market appeal out of any opportunities to get Internet radio airplay.

If this is allowed to happen, it would place niche genres and lesser known artist back in the exact same unfortunate predicament they were in for decades with regard to AM/FM radio. There are only so many radio frequencies - which means that there can only be so many AM/FM stations in any given market. An FM station in even a small market will sell for many millions of dollars - in a major market such as Fort Worth/Dallas, where I live, such a station will sell in the hundreds of millions of dollars. In such a world, station owners have no choice but to program their stations to wide, mass market audiences. That is the only way they can bring in enough revenue to pay off their mortgages and other bills. And that is why you don't find major market AM/FM stations devoted to nothing but 1920s/1930s pop or Ukrainian folk music. It is simply not possible to make enough money on such formats to pay for the cost of buying the station.

But that, unfortunately, is the environment the CRB's decision will bring to Internet radio if something is not done about the rates. Only this time there will be a substantial difference: with AM/FM such a situation is necessitated by the limitations of technology. With Internet radio, there are no such technological restrictions and the situation will have been brought about artificially by means of decree by a governmental board.

If the judges on the CRB are sincere about determining a royalty rate for copyrighted recordings that approximates a free market price, then that rate must necessarily take into consideration the fact that some recordings are worth more in the marketplace than others.

But the CRB does not take such economic realities into consideration. What it does is assigns an arbitrary and very high across-the-board flat rate applicable to all copyrighted recordings - a rate which, in fact, is economically viable for only the relatively small percentage of recordings that have a large, mass market appeal. And, as a result artists and genres that do not currently have a mass market appeal will be arbitrarily priced out of being able to enjoy the many benefits they currently derive from Internet radio air play.

Let's say some government board decided that, in the name of "fairness" to chair manufacturers, buyers would be required to pay no less than $50 per chair. Who would benefit from that? Obviously chair manufacturers who are currently selling chairs over $50. They would suddenly be protected from down market competition. And who would lose out besides those who wish to purchase lower priced chairs? Obviously those companies that specialize in making low priced chairs and the shops that sell them would be hurt very badly by such a regulation.

The per-song per-listener rates set by the CRB will have the exact same effect on recordings of niche genres and those by less famous artists.

The reality is that there are a great many recordings that probably have close to a negative per-song per-listener economic value. A very significant percentage of Internet radio stations out there cost more to operate than they will ever generate back in revenue. Such stations are primarily hobbies and labors of love. Yet there are a great many specialty genres and artists for whom such stations represent their only chance of getting airplay on Internet radio and the benefits they receive from such exposure. Their recordings have a negative per-song per-listener economic value because it costs the stations willing to feature them more money to play the recordings than they could ever bring in as a result of playing them.

For the CRB to price such copyright holders out of the market for Internet radio airplay does them a profound injustice - especially since the purpose of the CRB is to look out for the property rights and best interests of all copyright holders, not just copyright holders who happen to be the major mass market labels which control the RIAA.

If a group such as Mora's Modern Rhytmists were to get airplay on a station the size of Radio Dismuke, it would not generate nearly enough per-song per-listener plays to qualify Dean Mora for the minimum amount of royalties he would need to accumulate before SoundExchange would ever cut him a check. Yet if such a station were to include his recordings in its playlist it would be of tremendous benefit to him. People who otherwise would not be aware of his band's existence will discover it. Some of them will become fans. Some of them might google his name and go to to his website and find this page where they can buy some of his marvelous CDs.

I guarantee you that Dean Mora would make far more money in sales of CDs from only one year's worth of exposure on a single station the size of Radio Dismuke than he would ever see in a lifetime of SoundExchange royalties generated from several such stations playing his material.

In the music business, getting airplay is a major element in a recording's success - and the only reason the word "payola" exists in our language is because airplay is so beneficial that it is actually worth a copyright holder's while to pay a station in order to get it.

Never forget what this battle is about. In a world where professional recording studios are commonplace and can be rented by the hour, where there are countless outsourcers who will manufacture CDs for well under $1 each and where more and more music is being distributed over the Internet, the only remaining relevance that the major record labels have is in their ability to promote their artists to the large audience concentrations on major, trendsetting FM radio stations in order to generate hit recordings.

Internet radio threatens to scatter those FM type audience concentrations to the wind across thousands and thousands of smaller stations. When that happens, the marketing advantage the big record labels currently enjoy over the independents will be significantly diminished. Since the major labels know that Internet radio is here to stay in some form or another, they are attempting to use the RIAA's political pull in order to get the government to pass rules and regulations which will artificially create on the Internet the same audience concentrations they enjoy on FM radio and which they desperately need if they are to remain relevant in a digital and online world.

The fact that this is nothing more than an attempt on the part of the RIAA to protect AM/FM audience concentrations and move them over, intact, to the Internet became very obvious to me the last time this battle was fought back in 2002. At the time, the CRB came out with a per-song per listener rate of .0007 for Internet streams of AM/FM simulcasts while the rate they came up with for Internet-only broadcasters was exactly double or .0014. On what twisted logic can one say that the value of a given recording being streamed is somehow different depending on whether the stream originates from an FM broadcaster or whether it originates from a station such as mine? Fortunately, that double standard was struck down. But the very fact that it was proposed in the first place told me that it was nothing more than an attempt to artificially impose a situation where the only Internet streams that would be financially viable were AM/FM simulcasts.

The task of the Library of Congress and the Copyright Royalty Board is to protect the property rights and interests of all copyright holders. The fact that the judges on the CRB chose to use their authority to create an arbitrary rate scheme which will price a great many copyright holders out of the market for valuable Internet radio airplay so that some copyright holders with political pull can be protected from emerging forms of competition - well, that is disgraceful. And the fact that they attempt to use the honorable term "free market" as a rationalization for their decrees is beyond disgusting.

So long as a governmental body is dictating a statutory rate that is applicable for all sound recordings under copyright, the CRB's per-song per-listener model needs to be permanently abolished. Because it is a fact of reality that some recordings are worth more in the marketplace than other recordings, it is simply not possible to come up with a single flat rate that is fair to the interests of all copyright holders, large and small. And it certainly is not possible or feasible for some government board to determine individual per-song per-listener rates for each of the tens of thousands of artists.

If the judges on the CRB truly cared about a free market approach to the issue, they would have immediately and eagerly adopted the same percentage of revenue approach the other performing rights associations (ASCAP/BMI and SESAC) have used for decades. Unlike some arbitrary number tossed out by a handful of judges, the amount of revenue that a station generates is determined exclusively by the free market.

If a station brings in a lot of revenue, that probably means that the music it plays has value in attracting a large audience that is willing to support the station and its advertisers. If a station does not bring in a lot of revenue, it does not necessarily mean that it is "inefficient" as the CRB suggests. In a great many cases, it simply means the music the owner chooses to play is not able to generate a very large audience - and thus his revenue, assuming he even gets any, will be reduced accordingly.

Under a percentage of revenue model, to the degree a station is successful from a financial standpoint, the copyright owners who helped make that success possible get to share in it. If a station is not able to generate revenue from the music it plays - well, then the copyright owners are immune from the station owner's losses but still derive the many, many benefits they receive from the free publicity. Plus, most royalty organizations have a minimum license fee - so even the smallest webcasters who stream music to very few listeners would pay into the system.

The fact is that certain highly successful copyrighted recordings do have an economic value that station owners derive benefit from - and such station owners should be required to compensate copyright holders accordingly.

But it is also a fact that some copyrighted recordings do not have a great deal of economic value and that the primary financial beneficiary from airplay is not the station owner but the copyright holder in the form of increased visibility, web traffic and sales of things such as CDs and tee shirts. Those copyright holders should not be denied the opportunity to benefit from such valuable publicity that small webcasters are willing to provide to them at no cost.

The judges on the CRB asserts that "inefficient" webcasters unable to generate enough revenue to cover the per-song per-listener rates "trivialize" the property rights of copyright holders. In reality, it is the CRB that trivializes copyright holders whose works are not capable of generating enough revenue to enable webcasters to cover those arbitrary rates - and the result is that such copyright holders will no longer be able to reach their audience through Internet radio unless some webcaster is willing to go through the paperwork and hassle of contacting them one by one for permission to bypass SoundExchage. Few broadcasters have the time and ability to do that.

So long as the government is setting the rates, a percentage of revenue model is the fairest approach because it provides a means of addressing the legitimate concerns and needs of all copyright holders, large and small, famous and not-so-famous.

If you have not yet done so, please write your representatives and let them know that you support Internet radio and that Congress needs to push for a percentage of revenue royalty rate that is fair to the financial interests of all copyright holders - not just the the major labels which control the RIAA.

Still Here

Just a quick note to those who have been checking back for updated content.... things have been very busy over the past few days. I am currently working on another entry which I hope to have posted soon. So please do continue to check back.

Retroactive Bankruptcy

How Live 365's Most Successful Broadcasters Face Financial Ruin Even If They Shut Down Immediately

Imagine, for a moment, that you had an ongoing business relationship with an organization in 2006 and have already paid the $2,000 in charges that the organization had billed you for during that year. Now, imagine it is early March, 2007 and a governmental board announces that the rate should have, instead, been somewhere between $10,000 and $40,000 and that you have to pay the balance now retroactively. And, not only that, since January 1 you have been building up a bill with this organization at a rate which, by the end of the year, could result in you owing it up to $100,000.

Would you be able to fork over such an amount of money for an unexpected expense on something you had already paid a rather hefty price for in the first place? If so, would you be able to do so without a significant amount of financial pain? Would you possibly have to take out a loan of some sort to cover the bill? If not, what percentage of the population do you suppose is in such a position?

What I have described above is exactly what the Copyright Royalty Board did on March 2 to Live 365's most successful independent broadcasters who had signed up for the Live 365 X5000 package. These broadcasters are private individuals such as myself who are passionate about the music that they play and broadcast as a hobby, often investing considerable time and expense and usually getting no other reward than the the pleasure they get from doing it and the emails they receive from happy and grateful listeners.

Many of these broadcasters are now facing the prospect of financial ruin and perhaps even bankruptcy.

I hasten to add that I did NOT sign Radio Dismuke up for the X5000 package - thank goodness.

Here is a bit of background about the X5000 package, why it came into being in the first place and why those who signed up for it are suddenly on the hook for far more money that most of them can possibly afford.

Last time the RIAA tried to pull a similar stunt with Internet radio royalties a few years ago, a Small Webcasters Settlement Act was passed by Congress which allowed small Internet broadcasters with revenues under $50,000 per year and expenses under $30,000 per year to qualify for a flat SoundExchange royalty payment of $2,000 per year.

Live 365 and other major streaming audio providers such as AOL were way too large to qualify for the Small Webcasters Settlement Act and had to pay a very expensive per song per listener rate.

Because of that per song per listener rate, the royalty bill for Live 365's most successful stations, some of which which were pulling in hundreds of thousands of listener hours per month, ended up being a huge financial drain on Live 365. One option that Live 365 could have taken to address this problem would have been to significantly cap the number of free listeners that were allowed to tune into such stations at any given time. But such caps would have made it impossible for those highly successful stations to maintain their listings in important directories such as itunes.

To address this situation Live 365 came up with the X5000 plan.

Under the X5000, individual broadcasters agreed to get their own license with SoundExchange under the Small Webcasters Settlement Act and they, not Live 365, were responsible for $2,000 minimum royalty. In exchange, Live 365 gave these broadcasters 500 listener slots at no cost and covered all of the broadcaster's royalties for ASCAP/BMI/SESAC.

It was a great deal for everybody. $2,000 per year for 500 listener slots was a great deal for broadcasters - especially since Live 365 also provided the broadcasters with all of the server statistics needed to submit the quarterly reports to SoundExchange, which is not a small thing as many suspect that the reporting requirements were deliberately designed to make tracking and reporting requirements as difficult and as much of a burden for small broadcasters as possible. And, on Live 365's end, freed from having to pay the exorbitant SoundExchange royalties on the stream and only being responsible for bandwidth costs and ASCAP/BMI/SESAC royalties, Live 365 was actually able to turn a profit on the advertising it targeted to X5000 station listeners.

I guess it was too good of a deal because all of the provisions that Congress passed for small Internet broadcasters under the Small Webcaster Settlement Act were eliminated under the new royalty scheme.

Under the new royalty scheme, even the smallest webcasters have to pay per-song, per-listener.

Here is what makes this a financial disaster for hobbyists who became licensed with SoundExchange in order to qualify for Live 365's X5000 package: the new royalty rates, including the elimination of the provisions established by the Small Webcasters' Act are retroactive to the year 2006.

This means that webcasters who thought they would only be on the hook for $2000 for the year 2006 and might perhaps see a modest increase in that minimum amount once the new rates were announced by the Copyright Board are suddenly being told that they will have to retroactively pay MANY times that amount.

According to Mark Lam, the CEO of Live 365:

"The average X5000 station under these "per performance" rates will find their 2006 royalty obligation around $10,000, with some stations surpassing $40k. At current TLH, without any change in the new rates or streaming, some could find their 2007 SoundExchange bill approaching $100,000."

Again, keep in mind that the individuals he is talking about are not deep pocketed corporations who have lawyers who can fight this out in court. The are ordinary private citizens such as myself who run an Internet radio station as a hobby and are already probably spending more that they probably would like to on maintaining their stations.

Oh, and by the way, my understanding is that the royalty bill on these new rates is due very soon, with no regard for the appeals process which will hopefully overturn all of this.

Again, I ask, what percentage of the population, do you suppose, is in much of a position to suddenly absorb an unexpected $10,000, $40,000 or a $100,000 expense without being financially ruined or being in hock for years?

The Copyright Board, SoundExchange and the RIAA, which is behind the actions of both, are not content to just force these stations to go off the air - they want blood and are perfectly willing to knowingly drive decent individuals into personal bankruptcy.

And what did these broadcasters do to deserve something such as this being brought upon them? They had the nerve and audacity to provide their audiences with an opportunity to listen to something other than Brittany Spears and other lowest common denominator type stuff that the major labels who dominate the RIAA want you to listen to in order to ensure that music sales are largely concentrated on the hit recordings that such labels depend on.

I might add that broadcasters on Live 365 are people who choose, at great expense to themselves, to share their music with others legally.

I am sorry - but there is only one word that comes to mind which I think adequately describes what is happening to these broadcasters: evil.

Because of the potential impact of the new rates on X5000 broadcasters, Live 365 is strongly recommending that they consider lowering their free (i.e., non-VIP) listening slots to zero or taking their stations down completely.

As for the short-term impact on Radio Dismuke's Live365 stream - there is no word yet what, if anything, Live 365 will do. It is possible that they could eliminate the free listeners slots and make the station available only for VIP members. Or they could raise my rates by a rather significant amount in order to cover their increased costs. Long term, of course, if something is not done to overturn it, there is no way they can continue to carry my station at a rate that I can afford - assuming that Live 365 is even still in business.

Please do not allow the Copyright Board, SoundExchange and the lawyers and lobbiests at the RIAA to get away with it. Do not allow them to bring innocent men and women whose only crime was to have a dream of sharing the music they enjoy with others in a legal and lawful manner to be financially ruined in the name of protecting a technologically obsolete and increasingly irrelevant recording industry from the emerging competition it dreads and knows it will have a difficult time standing up against.

Above all, do not allow them to take away your freedom of choice in the sort of music you are able to listen to.

If you are a fan of the music that I present on Radio Dismuke, please do not allow them to take us back to the bad old days when few people outside of those who owned their own private collections of vintage 78 rpm records ever had much opportunity to listen to it.

Please write your representatives right now. And once you have done so, nag all of your friends to do the same. Speak out to anyone who will listen. Write letters to the editor. Put up postings in online message boards. Post something to your myspace page and all of your myspace friends. Please act quickly before it is too late.

Just How Insane Are The New Rates?

The Examination Of A Folly

Kurt Hanson's Radio And Internet Newsletter links to a Beta News article which illustrates just how absurd and out of whack the new SoundExchange royalties really are.

Beta News analyzed the amount of royalties that AM/FM broadcasters pay for composers' royalties to ASCAP, BMI and SESAC. Beta News estimates that the total royalties paid by AM/FM broadcasters in 2006 to the three organizations combined is approximately $437.5 million. These amounts are for the royalties paid by all of the over 12,000 AM/FM stations in the United States.

It is important to keep in mind that AM/FM stations are exempt from paying the SoundExchange royalties that Internet broadcasters are required to pay on top of ASCAP/BMI/SESAC royalties.

Here is where this starts to get interesting - as well as bloody absurd.

According to Beta New's calculations, in 2006, AM/FM stations in the USA paid, on average, $1.56 per listener in royalties. By contrast, based on the recently announced retroactive SoundExchange royalty rates for 2006, Internet broadcasters would owe, on average, $8.91 in per listener royalties for that same year. By the year 2008, this cost would rise to an average of $15.59 per listener.

Let's do some math.

According to that article, 56.7 million listeners tuned into Internet radio every week during 2006. Using Beta New's numbers, 56.7 million x $8.91 = $505.2 million in royalties retroactively owned by Internet broadcasters for the year 2006.

Now let's go back and look at the numbers quoted earlier.

In 2006, the over 12,000 AM/FM stations combined paid $437.5 million in royalties verses the $505.2 million that Internet radio broadcasters will have to pay under the new royalty rates that Internet broadcasters will owe retroactively for the year 2006. In other words, under the new rates, Internet broadcasters will have to pay 67.7 million more in royalties for 2006 than all AM/FM stations in the USA combined despite the fact that the audience for Internet radio is only one fifth the size of the AM/FM audience.

To put it bluntly - there is simply no basis on which anybody this side of a mental institution can claim that such royalty rates are reasonable, rational or just. That is why, to me, the only apt description of the new royalty rates is: they are insane.

There is a famous line in a novel that says: "Don't bother to examine a folly - ask yourself what it accomplishes."

The new royalty rate structure may be insane. But unless quick and immediate action is taken, it will do exactly what it was designed to accomplish: to close down Internet radio and eliminate the competition and threat that it poses to the large audience concentrations on FM radio the major labels which dominate the RIAA depend on in order to promote the sales of lowest common denominator hit recordings.

Please speak up NOW and don't let that happen.

Live 365's Call For Help

Live365 has posted its own Save Internet Radio page at:

http://www.live365.com/info/royalties.html

As with all of the other similar activist websites, Live 365 is asking that people write their elected representatives. However, Live 365 is asking that people make the following points in their messages:

1. Congress void the retroactive $500 per channel minimum that threatens to drive Live365’s small webcasters out of business.
2. Congress reinstate the Small Webcaster Settlement Act. The CRB declared that the 2002 SWSA would not be extended despite the Small Webcaster contracts SoundExchange offered on its website and signed with Small Webcasters for 2006 and 2007.
3. Stop the retroactive, ex post facto royalty payments for 2006 mandated by the CRB, until all appeals have been heard.
4. Create a level playing field by bringing the Internet radio per performance rates into parity with traditional and satellite radio. Unlike internet radio, traditional radio does NOT pay royalties to record labels or artists for songs performed over the air.

The $500 per channel minimum is very important because both of my service providers host many channels - Live365 has thousands of channels and LoudCity has hundreds. Some of these channels are VERY small.

For instance, a good friend of mine operates Radio Moscow a Live 365 hosted station which streams vintage Russian recordings from the 1930s and 1940s. He mostly promotes the station to his fellow World War II reenactors. Currently his station only streams a few hundred listening hours per month. Even under the ridiculous new royalty rates, such a tiny audience would amount to maybe $10 per month in royalties at the most - which is about what he is currently paying Live 365 to carry the station. If Live 365 was charged a $500 minimum per channel, it would have no choice (assuming that it will still even in business to begin with) but to pass that charge along to him.

Since my friend is a college student on a budget, he would have no choice but to close the station down. And if that were to happen - well, I think that would be a huge loss. Before his station came along, I had no idea what Russian music from that period was like. Now I do, thanks to his station and the time and effort he put in making it available. Today, anybody who happens to be curious is able to simply tune in an check it out.

There is NO other purpose of the $500 channel minimum than to make sure that networks such as Live 365 and LoudCity which focus on serving small operators such as Radio Moscow or even Radio Dismuke, which has a vastly larger audience, do not exist.

SoundExchange certainly cannot come out and say that additional channels constitute an additional expense for them because it is station owners who are responsible for the very significant burden of preparing the mandated reports and logging listenership patterns. Any additional costs involved in tracking and keeping up with the paperwork requirements for additional channels rests entirely with station operators and not SoundExchange.

Live 365's message about a level playing field between Internet broadcasters and AM/FM broadcasters is also worthy of comment. Unlike most countries, AM/FM broadcasters are not required to pay any performance royalties to record labels. They have for decades been completely exempt from them by law.

Personally, such an exemption has never made sense to me. My understanding is that the logic behind it is that, especially in the aftermath of the "payola" scandals of the 1950s, airplay on radio stations was considered to be free publicity for the record industry's products.

My big problem with all of it is that, with the advent of new mediums such as satellite and Internet radio, Congress has allowed a definite double standard to exist by continuing the exemption for AM/FM broadcasters but requiring broadcasters who use emerging technologies to deliver their programing to pay.

If airplay on a terrestrial station is considered as "free publicity" then why is the same recording being streamed on Live 365 somehow not considered "free publicity?"

Justice requires that there be consistency. If the exemption that AM/FM radio enjoys does, in fact, constitute unjust mooching on the intellectual property of record labels, then that exemption needs to be abolished - and, once that happens, the new statutory rates that the Copyright Office puts out need to be consistent across the board regardless of the particular medium that the music is distributed over. Imagine, for example, if ASCAP, BMI and SESAC, whose royalties over-the-air broadcasters are responsible for, decided to pressure the Copyright Office to set establish a rate structure that was significantly different for AM stations than for FM stations. It would make no sense whatsoever. Neither does it make sense to discriminate between terrestrial stations and satellite and Internet stations.

If, on the other hand, the legal exemption for AM/FM radio is somehow justified - then on what basis would it not be justified for satellite and Internet radio as well?

I am not especially knowledgeable about the various legal and property rights issues involved - but my off-the-cuff guess is that all broadcasters, including AM/FM stations, probably should be paying royalties for the copyright recordings that they play. If so, and if our laws required that the Copyright Board devise a royalty scheme that was applied evenly to all broadcasters, regardless of the specific technology they use to deliver their programs to listeners, I guarantee you that we would not be seeing such astronomical royalty rates.

Imagine if all FM broadcasters were in the same boat right now as the Internet broadcasters and faced with the serious likelihood of having to end all musical programming within weeks. Do you really think that the RIAA would allow that to happen? Obviously the record labels need the FM stations - as evidence by the latest round of new "payola" scandals. (As an aside - I do not have a problem with "payola" and think FM operators should be free to accept it if they wish. So long as competition in the form of alternative mediums such as Internet and satellite radio is allowed to exist, such practices on the part of station operators will eventually cause their programming quality to suffer and drive audiences to other sources where music is programmed based on what listeners want to hear and not what a bunch of salesmen want people to hear. )

Never forget that the whole reason we are having to fight this battle in the first place is because the RIAA is desperate to preserve the dominance of major metropolitan FM radio stations as the trendsetting force in determining which recordings become popular and which do not. Only the major labels which control the RIAA have the financial means and clout to get through the door and exert influence on program directors at such stations. Such stations rarely give independent labels and artists who self-promote the time of day.

In a couple of years, when Internet radio becomes available in people's automobiles and drivers will have thousands upon thousands of stations to choose from and trends in popular music are no longer determined by a handful of major FM stations - well, the advantage the major labels will have in promoting their artists over independent artists will be significantly diminished. When that happens, there will be little, if any, reason for the major record labels to exist other than to collect what money they can from reissues of musical acts that still have an audience leftover from their glory days before they became technologically and economically obsolete dinosaurs. For the RIAA this battle is all about holding that day off for as long as possible.

As for the "the retroactive, ex post facto royalty payments for 2006 mandated by the CRB," I will have more comments on that in a future posting.

MONOPOLY RIAA Style!

Ian House, a regular participant on my Message Board put up a light-hearted posting about the game MONOPOLY and gave some helpful tips.

Well, I guess this Internet royalties nonsense has been on my mind too much - because the very moment I read his posting about Monopoly, my warped brain immediately came up with a new twist on the old "Golden Era" game from the 1930s. It is called RIAA MONOPOLY.

Let's see.... considering that, under the new rates, Internet broadcasters would be required to fork over 125% or more of their existing revenues to SoundExchange for royalties that AM/FM broadcasters are exempt from - well, it looks to me that I have found a way to make the game much more "real world."

Below is the posting that I put up:

- - - - -
RIAA MONOPOLY

It has been years since I have played MONOPOLY!

But I think I have come up with an exciting new variant of the game. It is called RIAA Monopoly (and if anybody is expert at seeking to become a monopoly, it is the RIAA!).

Here is how it works:

One lucky participant gets to play the RIAA. He plays the game as usual.

Another lucky participant gets to play FM radio.

All of the other suckers get to play on their own behalf.

Instead of all houses and hotels being sold by the bank, they will now be sold by the person who plays the RIAA who gets to keep all of the money raised in this fashion.

The other participants play as usual and fork over the customary rents when they land on another person's property. However, the person whose property is landed upon has to immediately turn over 125% of all rents thusly collected as a "royalty" to the person who is playing the RIAA. The person playing FM radio, however, is exempt from having to pay any royalties to the RIAA and gets to keep all of the money he receives from rents. The person who plays the RIAA then funnels a large portion of the money he receives in royalty payments under the table as a "payola" payment to the person who plays FM radio so that he can use it to buy more houses and hotels from the RIAA.

Sounds like a really fun game - and one that truly lives up to the name of the game!

EDIT

It occurs to me that when I came up with the rules I forgot about the fact that the new royalty payments are retroactive So here is one additional change to the rules to make the game more like real life: Before the game starts, all players except for the person playing FM radio are required to fork over to the person playing the RIAA 125% of all the rents that they collected the last time they ever played the game of MONOPOLY! And if one doesn't? Well, then it's go directly to jail, do not pass Go, do not collect $200.

The Purpose Of This Blog

I am starting this blog so that I can keep my audience and other supporters up-to-date in the battle to save Radio Dismuke and all other Internet radio stations from the crippling new SoundExchange royalty rates recently announced by the Library of Congress.

The blog will consist of a mixture of news updates, my own personal commentary on the situation as well as specific calls to action should they become necessary.

For those who have just stumbled across this blog via a link somewhere on the Internet, Radio Dismuke is an Internet radio station I operate that is devoted to popular music and jazz from the 1920s and 1930s decades. The station is currently carried on both the Live365 and LoudCity networks. A decade ago, few people had much, if any, significant previous exposure to the sort of music that I present on Radio Dismuke. The music fell out of popularity over 65 years ago and has been all but absent from the AM/FM radio airwaves since with the exception of a few weekly programs mostly on non-commercial stations in a very small handful of local markets. Today, thanks to Internet radio, the music is experiencing a renaissance and can be enjoyed by anyone with a computer and Internet connection. Thanks to Internet radio, music which was once enjoyed only be a handful of hard core collectors of vintage 78 rpm records now has a loyal and growing worldwide audience - including many people in their teens and twenties who were born many decades after the music fell out of the public spotlight. All of that progress is now in jeopardy as a result of the attempt by the RIAA to kill off independent Internet radio stations.

For those who are not familiar with or do not even care to become familiar with 1920s and 1930s music, my battle is still your battle. Presumably you or people you care about enjoy at least some genre of music and see the value in having as many listening options open to you as possible. Well, the RIAA wants to take those options away from you and use the power of legislation to make sure that the only musical programing that is available on the Internet is the same sort of cookie cutter lowest common denominator stuff that is presently heard on AM/FM radio.

For those who have never listened to Internet radio, check it out while you still have a chance to do so. It is very addictive. In the right hand column I have provided links to several stations. Most of them focus on various types of music from the early 1900s. But if you do a little searching around at the Live 365, LoudCity and Shoutcast Directory links, you will definitely find something to suit your taste regardless of what musical genre you enjoy. If you are into more mainstream modern type music, I have linked to Radio Paradise. I have not listened to it because I do not care for modern popular music. But I admire how the husband and wife owners of that station have been able to build it up and turn it into a financial success. Considering that most Internet radio stations do not generate a profit, that is a tremendous achievement. And, unfortunately, if something isn't done quickly, all of the hard work, time and money that was spent building that station will be wiped out.

I hope you will please consider joining me and all other webcasters in our battle for survival.