Status Update

I just sent the following email out to the Radio Dismuke mailing list. You can subscribe to that list for updates on Radio Dismuke and the Internet radio royalty situation by going to the Radio Dismuke website.

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July 15 has passed and, thanks to the emails, letters and phone calls listeners placed to Congress, Internet radio is still streaming - at least for now. Under pressure from Congress, SoundExchange agreed at the last minute to not immediately enforce the devastating rate increases that were scheduled to take effect today and to enter into negotiations with webcasters.

To those of you who have contacted your representatives in Congress, you have my profound gratitude. Please know that your your doing so DID have an impact. I can guarantee you that the ONLY reason that thousands of stations did not go silent yesterday was because of the pressure Congress felt after hearing from hundreds of thousands of concerned constituents over the past several months.

Unfortunately, at this point, there is still much that needs to be resolved and the future of Internet radio still faces many potential dangers in the days and weeks ahead. The good news is we are still alive to fight and, now that Congress has stepped into the picture, SoundExchange is under pressure to negotiate honestly and in good faith - something that it has not done to date.

Right now, the situation is very fluid and lot of what is going on is taking place behind the scenes and is simply unknown to most webcasters and the general public. Based on what I have read from various online sources, here is where things currently stand:

SoundExchange has agreed to cap the $500 per channel "administration fee" which threatened to immediately bankrupt webcasters such as Live365, Pandora and Yahoo who each offer thousands of channels. The cap would be at 100 channels or $50,000. My understanding is that this only applies to stations that fall under the "large commercial webcaster" category which is determined by the size of a company's annual revenues. Live365 falls under this category. LoudCity, however, is classified as a "small commercial webcaster" and will likely end up under some different sort of arrangement.

A new bill, H.R.3015, has been introduced in the House which would officially postpone implementation of the new rates for 60 days in order to allow time for negotiations between SoundExchange and webcasters or for passage of the Internet Radio Equality Act which would set Internet radio royalties at a rate equal to what satellite radio pays to perform the same recordings. Such a bill would give webcasters a postponement of execution that is more binding than SoundExchange's mere promise to not enforce the new rates. Some websites are suggesting that the bill will pass quickly while others say it stands little chance of passing. The general consensus, however, is that just the mere fact that such a bill is out there is probably enough to pressure SoundExchange into keeping its promises.

One area of particular concern to me is reports that, in the negotiations with the large commercial webcasters, SoundExchange has supposedly said that the per-song per-listener rates are "non negotiable." This ought to be troubling to the Radio Dismuke audience and fans of niche genres because Live365 falls into that category by virtue of its annual revenues. Despite being a "large webcaster" Live365 is, in fact, the home to the vast majority of the Internet's SMALLEST radio stations. Live365 makes it affordable for hobbyists and music enthusiasts to provide highly specialized programing to very limited audiences that are simply not profitable for more commercially oriented webcasters to serve. For example, on Live365, Radio Dismuke is only one of several stations that feature vintage music. Weimar Rundfunk specializes in European recordings from the 1920s though 1940s. Elite Syncopations specializes in ragtime music. And there are others.

Beyond the danger to Live365, my concern about the negotiations with the large webcasters is that SoundExchange might be taking a hard line approach with the per-song per-listener rates in order to pressure webcasters such as Yahoo, AOL and Pandora into cutting direct license deals with the major RIAA labels at lower rates. Such an approach would be a DISASTER for independent artists. If the only way for the largest and most successful webcasters to survive is by dealing directly with the labels, it would mean that it would cost such stations far more money to play music by unknown artists and obscure genres than it would to play mass market hits - which is the exact opposite of what would occur under normal marketplace conditions. It would also give the RIAA labels considerable leverage over such webcasters because they would always be under the potential threat of their direct license not be renewed at the end of its term. This would have the effect of giving the RIAA labels considerable leverage over stations in terms of getting airplay for the particular recordings that the labels are especially interested in promoting at any given time.

Congress and its constituents have already made it clear that they will not allow RIAA/SoundExchange to get away with killing off Internet radio completely. My guess is that SoundExchange has already conceded that it has lost the battle as far as killing off the smaller webcasters is concerned and that its focus is now on trying to at least make it so that the most successful webcasters who have the deepest pockets in terms of being able to promote themselves are under extreme financial pressure to play only RIAA approved formats and artists.

Another concern I have is that SoundExchange will attempt to harass smaller stations out of existence by unreasonable reporting requirements. Under the old rates, educational institutions such as colleges paid very low licensing fees. Many colleges, however, have been forced to take their streams down not because of the royalties but because they simply could not afford the expense and hassle of keeping up with all of the reports that SoundExchange was demanding. I have read that SoundExchange is already complaining in the current negotiations about the need for increased reporting and tracking requirements.

Never forget that the RIAA's motive in this entire mess has ALWAYS been nothing more than to kill off what it sees as an emerging threat to the influence it has traditionally had over which recordings receive all-important FM radio airplay. Internet radio is poised to replace FM radio's role as the primary musical trendsetter in our culture. If the RIAA labels are not able to exert similar influence over airplay on the Internet, their days are very numbered. The very moment it becomes apparent to artists that they can get much needed airplay and become successful on their own, there will no longer be any reason for them to sign the terribly one-sided record contracts with the RIAA labels. By bypassing the major labels, artists will be able to retain much more control over their artistic product and would be entitled to receive 100 percent of all revenues that might be derived from it. The way things are rapidly evolving, there will soon no longer be a need for the role that the major record labels traditionally served prior to the advent of recent technological advances. What we have been witnessing over the past few years is an obsolete and dying industry desperately trying to use the law of the land in order to carve out a relevance and role for itself that would otherwise not exist in a free market.

In my opinion and in the opinion of most webcasters, the only viable LONG TERM solution to this mess, regardless of the outcome of any negotiation with SoundExchange, is the passage of the Interent Radio Equality Act. If the act were passed, Internet broadcasters would still be paying the highest royalties of any category of broadcaster in the United States and it would be among the highest royalties paid by broadcasters anywhere in the world. The advantage of the Act, is that it would provide PERMANENT relief to the various attempts by the RIAA to kill off webcasting as an independent industry.

Whatever may come out of the negotiations with SoundExchange is only going to be good through the year 2010. After that, the whole process starts over again. The RIAA attempted to shut down Internet radio when the first rates came out in 2002 and was stopped only because of a pubic outcry to Congress. At this point, it appears that the same might happen in 2007. The fact of the matter is, however, that webcasters simply cannot afford to have to endure this every four years. No serious investor is going to make a substantial financial commitment to an industry that is under constant threat of a possible forced shutdown in the future. Very few webcasters currently make much, if any, profits. And yet they have been forced to fight a battle that has been very costly in terms of legal and lobbying expenses, staff hours as well as lost opportunities that might have been pursued had the webcasters been able to focus more on their businesses than on fighting the RIAA. I have been fortunate in that my agreements with Live365 and LoudCity have sheltered me from such expenses. However, even on my level, this battle has been costly in terms of lost opportunities. For over a year and a half now I have been more or less forced to put all of the various plans I have entertained for substantially expanding Radio Dismuke's audience and programing abilities on indefinite hold until the royalty issue has been resolved one way or another. It makes no sense for me to sink time and money in significant expansion when I have no way of knowing whether my existing service providers will still be around and whether or not I will be forced to struggle to find a way to keep the station going at a fraction of its present size at a significantly increased price. The Internet Radio Equality Act would provide a long term legal stability that the Internet radio industry has yet to enjoy. Had such an approach been taken since the get-go, I can assure you that Internet radio would be far more advanced and evolved that it presently is.

Because the long term outcome is still uncertain, it is very possible that webcasters will once again be forced to ask their listeners to contact Congress on their behalf before this is finally over. I will let you know when and if any such action becomes urgent.

In other news, despite the gloomy mess of the past few months, I have been constantly updating the Radio Dismuke playlist. Over the past weekend, I added 60 new selections - all from vintage 78 rpms. I would guess that over 80 percent of those new selections have never been reissued in CD format. I have many hundreds of additional 78 rpm recordings lined up for eventual inclusion. The difficulty with 78 rpms is that transferring them and digitally restoring the audio so that it will be acceptable to modern audiences is very time consuming so using them has to be an ongoing and very long-term project. As of today, Radio Dismuke currently has 1,947 tracks in its playlist. The playlists of most terrestrial stations are but a fraction of that size. At its present size, it takes over 4 days for Radio Dismuke to cycle through its playlist (I do have it set up so that recently added recordings are played somewhat more frequently). The current playlist features 665 unique artists - far more than one would hear in a given week on a typical FM station. According to one of the Live365's employees, during the month of May, over 250,000 artists received airplay across the thousands of Internet stations in the Live365 network. That's about 249,000 artists who would have most likely received NO airplay at all had it not been for Internet radio and about 249,500 more artists whose existence and work the major RIAA labels would rather you not be made aware of. Internet radio is special and, in my opinion, it is the most wonderful thing that has come along for music and the artists who perform it since the invention of recorded sound. It is definitely something worth fighting for.

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Please feel free to foward this email to anyone you think might be interested in reading it.

Urgent Apeal From SaveNetRadio.org

Below is an email that I sent out to the Radio Dismuke mailing list (you can sign up to be on that list on my website at www.RadioDismuke.com )

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At the end of this email is an URGENT message that the SaveNetRadio.org has put out and which I support. This Sunday, July 15 is the day that the new royalty rates become due retroactively and will drive most webcasters into bankruptcy.

Not only are the per-song per-listener rates themselves very high, on top of them are a $500 per channel "administration" fee that will be ruinous for my service providers Live 365 which hosts around ten thousand channels and LoudCity which hosts around five hundred. All of these fees are retroactive to January 2006. In the case of Live 365, it means that on July 15 they will immediately be in the hole for about $5 million just for one year's "administration fees" alone. Live 365 was founded a few years ago during the dot.com boom and only turned its first profit ever last year - and that profit was only a few thousand dollars. Live 365 simply does not have millions of dollar to fork over.

LoudCity is in a similar situation. Not only will they owe about $250,000 in "administration" fees, they will be force to pay per song per listener rates for all of 2006 a year that they had every reason to believe would have been charged on a similar basis as the old royalty rates with perhaps a reasonable increase. For them, their SoundExchange royalties under the old rates would have been capped at $2,000. Their royalty bill from my stream alone is now going to cost them well in excess of $2,000 and, when one multiplies that by 500 stations, the bill will have RETROACTIVELY jumped from around $2,000 to into the HUNDREDS of thousands of dollars. Based on my knowledge of the rates they charge their customers, my guess is that LoudCity took in CONSIDERABLY less than $180,000 in TOTAL revenues last year - not even enough to pay the "administration fees" which are being retroactively applied to them.

As I have explained in previous emails, this is all part of an effort of the RIAA to effectively take over Internet radio by killing off the existing players so that the major labels can sign "sweetheart deals" with hand picked webcasters who will be charged less than the statutory royalty rates in exchange for playing the lowest common denominator mass market recordings currently found on FM radio and from which the four major RIAA labels derive most of their revenue. This is nothing more than a disgusting effort to use a very flawed law that the RIAA lobbied for in order to kill off emerging competitors (independent artists and niche genres which, thanks to Internet radio, were able to receive radio air play for the first time ever) in order to prop up their technologically obsolete business models.

As of right now, both of my service providers, Live 365 and LoudCity have said that they DO plan on remaining on the air after the July 15 deadline passes. From what I gather, the attitude that both will be taking is that, since they will ALREADY be effectively bankrupt as of July 15, they have absolutely nothing to lose that they haven't already lost and will keep broadcasting while attempting to fight it out in court until they receive a court order that forces them to shut down. I have no way of knowing for sure how long such a process will take - but so long as they are fighting this, I will continue to provide them my streams of 1920s and 1930s popular music and jazz. Other webcasters, for a variety of reasons, are not quite as gutsy as Live 365 and LoudCity in this regard and plan to go out of business as of July 15. When that happens, a MONSTROUS injustice will have taken place - and many will lose their businesses, their incomes and, in some cases, even their homes. The ONLY thing that webcasters are "guilty" of is playing music and artists that the RIAA labels would prefer that you not be aware of on grounds that it might diminish interest in the artists and music that they want you to be listening to and purchasing.

The recent Day of Silence was EXTREMELY successful in terms of the number of people that contacted Congress. Congressional switchboards and faxes were jammed from the very large number of calls from the hundreds of thousands of concerned Internet radio listeners who called in. Unfortunately, the RIAA is a VERY powerful organization with LOTS of political pull and many bought and paid for politicians in both houses of Congress. At last count 127 members of the House have agreed to co-sponsor the Internet Radio Equality Act which would set Internet radio royalty rates on par with those charged satellite radio and resolve the whole situation. There IS a significant amount of support for our cause in Congress. But, in order for it to do any good, the bill has to come to the floor for a vote. That can be a very difficult thing as it is not hard for opponents of a bill to kill it off in committee. That has essentially what has been happening since the otherwise successful Day of Silence.

Another factor is that SoundExchange, the royalty collection organization founded and controlled by the RIAA is sending out very false and misleading information to members of Congress - most of whom are NOT scholars in the complicated issue of copyrights and royalties. For example, the head of SoundExchange yesterday distributed an email to members of Congress suggesting that it has offered to cap the $500 minimum fee to $2,500 per service provider. That is VERY misleading. The offer on the part of SoundExchange to cap the fee was ONLY good through 2008 AND required webcasters to agree to give up all future efforts to lobby Congress for changes in the law. No webcaster in his right mind would agree to such a thing - and, in the long run, what good is it to effectively AGREE to go out of business in two years and voluntarily forfeit one's right to petition Congress for redress of grievances? The ONLY reason that SoundExchange made such a bizarre offer in the first place was to provide window dressing so that it could tell Congress that it was "working" with webcasters and that it is the webcasters who have turned down their alleged offers of benevolence. This is the nature of the sort of organization that webcasters are up against - and, as of right now, it is very close to achieving its goal of shutting down all Internet radio except for a handful of RIAA sanctioned operators.

SaveNetRadio is requesting people to IMMEDIATELY contact ALL of their Senators and Congresspersons TODAY and urge them to support the Internet Radio Equality Act and to bring it up for a floor vote IMMEDIATELY. They are asking Internet radio fans and supporters to not quit until they feel that they got their message across very clearly. If your representative has already co-sponsored the bill, please thank them for their support and ask them to please push for the bill to be put up to a floor vote now BEFORE the July 15 deadline goes into effect. If you have already contacted your representatives in support of this issue - you have my profound gratitude. If it is all possible, please do so AGAIN in order to stress the importance of bringing the issue to a floor vote.

Here is where you can go to look up the name and contact information for your Congressperson and Senator:

http://www3.capwiz.com/saveinternetradio/alert_9738601.html

Your support on this is appreciated not only by me but by may many, many listeners who depend on Internet radio in order to hear the music that they love - music that is NOT available on FM radio and will NOT be available on the Internet for much longer if the RIAA achieves its goal of transforming the Internet into a carbon copy of FM.

Below is the plea from SaveNetRadio.org

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URGENT URGENT URGENT
IMMEDIATE ACTION NEEDED FOR THURSDAY, JULY 12TH

Time and options are running out for Internet Radio. Late yesterday, the U.S. Court of Appeals DENIED the emergency stay sought on behalf of webcasters, millions of listeners and the artists and music they support.

UNLESS CONGRESS ACTS BY JULY 15th, it is the end of the road for Internet radio.

We are appealing to the millions of Internet radio listeners out there, the webcasters they support and the artists and labels we treasure to rise up and make your voices heard before this vibrant medium is silenced.

This situation is grave, but that makes the message all the simpler and most serious. CALL YOUR SENATORS AND REPRESENTATIVES RIGHT AWAY and urge them to support the "Internet Radio Equality Act." If they've already co-sponsored, thank them and tell them to fight to bring it to the floor for an immediate vote. If the line is busy, call back. Call until you know your voice has been heard. Your voices are what have gotten us this far -- Congress has listened. Now, they are our only hope.

TELL THEM.

We are outmatched by lobbying power and money but we are NOT outmatched by facts and passion and the power of our voices.

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The exact page of the SaveNetRadio.org website that allows you to look up Congressional office phone numbers is here: http://www3.capwiz.com/saveinternetradio/alert_9738601.html

Artists And Internet Radio

I have pointed out in several of my last postings that, after webcasters and listeners, the group that will be most injured by the pending royalty increases is independent artists - i.e. artists who record and distribute their music through labels and venues other than the major RIAA labels.

Now a musican by the name of SONiA is very eloquently making the same case in an editorial in the Baltimore Sun.

"While the royalty rate increases would mean certain bankruptcy for almost every Webcaster, the effect on indie artists would also be disastrous. Losing Internet radio would mean the loss of our biggest promotional resource.

This becomes obvious when you look at the market. Right now, independent artists make up less than 10 percent of what's played on broadcast radio. On Internet radio, we make up about 37 percent.

And as much I appreciate royalties as an artist, a bump in royalties means little to indie singer-songwriters if it also means the death of our biggest source of exposure. If Internet radio dies, there won't be any royalties to pay...."

She concludes by saying:

"For us, Internet radio has become essential. A world without it can only be described as scary."

Check out the entire editorial - the points she makes are right on the mark.

http://www.baltimoresun.com/news/opinion/oped/bal-op.radio04jul04,0,1361533.story?coll=bal-oped-headlines

Day Of Slience - Radio Dismuke Joins In With Thousands Of Webcasters

Today, June 26, 2007 Radio Dismuke joins thousands of Internet radio stations in observing a Day of Silence to call attention to the impending shutdown of the vast majority of Internet streams if the new sound recording royalty rates are allowed to go into effect on July 15. For today only, listeners who tune in will be directed to a non-music informational stream explaining the crisis facing Internet radio and featuring testimonials from a variety of broadcasters. Normal Radio Dismuke programing will resume on Wednesday.

The Internet Radio Equality Act has been introduced in both the US House and Senate which would establish Internet radio royalties at a rate that is equal to the more reasonable percentage of revenue model that satellite broadcasters pay for airing the exact same music. By contrast, the rates which are scheduled to go into effect on July 15, are based on a per-song per-listener basis and would amount to well over 100 percent of most existing webcasters' annual revenues - and they would be applied RETROACTIVELY back to January 2006. The Act would also do away with a $500 per channel minimum so-called "administration fee" that is part of the new rate structure. Radio Dismuke's service providers, Live 365 and LoudCity host THOUSANDS of Internet radio stations. This administration fee alone is likely to send them into bankruptcy. Indeed, based on the number of unique channels they offer, four of the top Internet radio networks, Live 365, Rhapsody, Yahoo and Pandora alone would owe SoundExchange, the RIAA's royalty collection arm, approximately $1 BILLION per year for these administration fees alone IN ADDITION to the very expensive royalties. To illustrate how absurd this is, that $1 billion in "admin fees" from those four webcasters alone would vastly exceed the $20 million in total royalties that SoundExchange collected last year from all Internet radio stations combined.

The new rates are nothing more than a thinly disguised attempt on the part of the RIAA to kill off a rapidly emerging medium which, by bringing the public's attention to an unprecedented range of independent artists and niche genres, threatens the market share the RIAA labels have held for decades. According to Live 365's Director of Engineering, last month the several thousand stations across the Live 365 network featured recordings by over 250,000 artists. That's probably around 249,000 more artists than you would likely be able to hear on your local FM radio stations - artists who would have almost no opportunity for broadcast air time to expose their works to new audiences were it not for Internet radio. That's 249,000 artists whose existence and music the RIAA would prefer that you not know about.

The major RIAA labels make their money by selling mass market recordings aimed at the widest and lowest common denominator - i.e., the sort of music you will hear on FM radio and find in the limited assortment of CDs available at your local discount retailer. The degree to which audiences discover and become enthusiastic about the wide variety of wonderful artists and music that fall outside of the RIAA labels' lowest common denominator offerings is the degree to which their market falls apart on them. Every time I receive an enthusiastic email from a high school student telling me how, as a result of discovering Radio Dismuke, 1920s and 1930s popular music is now his or her favorite type of music, that is one less person who is likely to act like a good little sheep and buy the latest hit recording that has been played over and over again on half the FM stations in town. And the same is true for the people who, through Internet radio, discover stations which play Ukrainian folk music, or ragtime, or polka, or blues, or jazz or even features some group of young rock musicians who perform at local clubs and are not famous enough to get FM airplay.

Internet radio is at the forefront of a wonderful revolution in both how enthusiasts listen to music and how aspiring artists promote themselves. It is bringing about a world where audiences will have endless options to access an unprecedented variety of quality music and where artists - especially those who previously had little hope of getting past the focus groups and "gatekeepers" at the RIAA labels and FM radio stations - will have new opportunities to make themselves known to new fans and to promote their recordings and live performances. The RIAA does not have any special advantage in such a world and will face new competition from a wide variety of sources, including artists who in an earlier day would have signed with an RIAA label but now realize it is increasingly advantageous to remain independent and thereby retain ownership and control of their music and keep all of the financial rewards for themselves. Therefore, the RIAA has used its political pull in an attempt to kill off the new and increasingly popular industry which is making such a world possible: Internet radio.

If you value the music that I and countless other Internet broadcasters present, please do not allow that to happen. Please telephone your Congressperson and both of your Senators TODAY and ask them to support the Internet Radio Equality Act. In the House, the specific bill is H.R. 2060. In the Senate the bill is S.1353.

For those who have responded to my previous requests to contact your representatives, I and all other Internet broadcasters thank you. Your letters, phone calls and emails were what has made it possible for bills to exist today in both houses of Congress. But there is still a lot of distance that needs to be covered before the future of Internet radio is secure. Now that there are very specific bills on the table, please consider contacting your representatives AGAIN and encourage them to support the Internet Radio Equality Act.

Those who have followed my postings here on this blog now know that I am not a fan of statutory royalties in any form. As I pointed out in a previous posting, under such a compulsory and crude "one size fits all" approach, it is impossible to be fair with or adequately protect the rights of all players. There are certain aspects of the Internet Radio Equality Act that I do not like and take exception to. But these shortcomings pale in comparison to the profoundly unjust and, in my judgement, downright evil attempt to kill off an absolutely wonderful new medium with endless potential and possibilities for the purpose of artificially propping up a de-facto cartel of dying and technologically obsolete companies which through their legacy revenue streams are, unfortunately, still able to purchase and wield a substantial amount of political pull. Short of a radical reexamination and reform of certain aspects of our copyright laws, the Internet Radio Equality Act is our best hope of stopping this injustice before it does a great deal of damage to both webcasters, artists and enthusiasts of the many musical genres that, prior to the Internet, were simply shut out from radio airplay.

Hearings on the Internet Radio Equality Act begin soon so it is important to take action NOW. By contacting your representatives, you will be doing your part to ensure that the Day of Silence is only a DAY of silence and not a permanent reality after July 15.

A Free Market Answer To Statutory Royalties - How It Would Kill The RIAA

Note: Some individual whom I refuse to dignify by linking back to has grotesquely distorted one of my previous postings and has used it to insinuate that webcasters seek an unearned license to steal copyrighted music and falsely asserted that I somehow am an advocate of statutory royalties and the CRB process.

For the record, I am not and never have supported statutory - i.e., government mandated - royalties. I very clearly stated the context of my remarks in the conclusion of my posting when I said: "So long as the government is setting the rates..." I made it very clear in my posting that I was not in favor of the government setting royalty rates. However, as any person who has any grounding in reality ought to know, regardless of what the rates end up being when the CRB ruling is scheduled to go into effect on July 15, the rates are going to be ones that have been set by the government. To argue whether they should or should not be set by a governmental board in the first place is certainly a very valid topic for discussion - but for webcasters who are fighting for their survival the question is academic. To eliminate statutory royalties would require a major overhaul of the copyright laws and the abolition or, at the very least, a major reworking of the Digital Millennium Copyright Act. None of this is going to be on the agenda in Washington DC anytime soon - certainly not before webcasters are forced into retroactive bankruptcy by the new rates.

To set the record straight and to defend myself against this individual's disgraceful misrepresentation of my position, I am publishing a posting I put up a couple of months ago to a private broadcasters-only forum. (One of the readers on that forum, however, asked for and received my permission to republish my remarks here. ) This posting will very clearly establish that I am NOT an advocate of statutory licensing. In it, I propose a free market alternative which would recognize and protect the rights and interests of both copyright holders and webcasters. I also explain why the modern day Luddites at the RIAA would NEVER go along with such a proposal.

A Free Market Answer To Statutory Royalties - And How It Would Kill The RIAA

My problem with the compulsory license is that it is a rather pathetic and grotesquely unfair way of protecting intellectual property rights. The fact of the matter is that not all owners of intellectual property have similar interests in the marketplace. Indeed, as we have seen, the marketplace interests of the vast majority of intellectual property owners - i.e. the independents - are very much at odds with the interests of the RIAA labels. In a free marketplace, everyone is able to battle it out and everything is ultimately decided by what the customers have to say. Under a compulsory license, everything is pretty much determined in advance by a governmental body and the one who wins is usually the one with the largest amount of political pull.

This is exactly what we have seen with the CRB which has set rates at a level that favors the interests of the lowest common denominator recordings of the RIAA labels by making it too expensive for broadcasters to stream less famous artists and niche genres and thus depriving them of the valuable Internet radio exposure they have come to depend on. In other words, the CRB basically has set itself up as the agency that exists to protect the interests of the RIAA by keeping emerging competitors from gaining access to the marketplace.

One of the cardinal rights of ownership is the ability to charge whatever price one wishes and is able to voluntarily get. If you make pencils and want to sell them for $100 each and someone is dumb enough to buy them - go for it. Likewise, if a copyright owner wishes to charge $100 per song per listener or to not license his recordings at all - well, that is a major part of ownership and he should have every right to do so. And likewise, we have every right to treat them the same way we would someone who offered to sell us a ten cent pencil for $100.

In reality, however, people do not charge $100 for ordinary pencils. And, unless there happens to be a temporary shortage of certain raw materials, nobody goes around complaining that pencil prices are outrageous and pencil manufacturers are not at each others throats over what price pencils should sell for. The marketplace takes care of that. It ought to do the same thing with regard to what price, if any, broadcasters pay for royalties.

Here is what I propose in place of compulsory licensing:

When a sound recording is copyrighted, the automatic default will be that NO license is required for public performance. Copyright holders who are eager for exposure and publicity might consider this to be their very best option - and it certainly will give broadcasters a HUGE incentive to play their material.

Copyright owners who do not wish to allow free public performance of their material have the option of specifying which Performance Rights Organization (PRO) they wish to license their material through - or they have the option of requiring that any license must be granted by the copyright holder exclusively.

Note that I say "which PRO." The notion that SoundExchange should be a monopoly is absurd. If the RIAA wishes to license all of its material through SoundExchange for outrageous rates - then it should be able to do so. But it does NOT have the right to demand that all other copyright holders be forced to either do the same or else give the material away for free. Copyright holders who wish to charge rates that are more reasonable have every right in the world to form their own PRO for such a purpose.

What I also propose is that every sound recording sold carry a notice of the licensing requirements. For example: "Public performance license granted" "Public performance license through SoundExchange" or Public performance through SoundExchange Competitor X or "Must contact copyright holder for public performance license." The Library of Congress would also maintain a database of all recordings under Federal copyright where broadcasters could quickly and easily check the status and licensing requirements of any recording.

Under my proposed system, if the RIAA wished to charge outrageous rates for its material, it would be very easy for broadcasters to identify such recordings and refuse to buy them or include them in their playlists. And it would be very easy for broadcasters to identify those copyright owners who DO want airplay and are willing to either give it away for free or else charge reasonable rates.

Such a system would protect the rights and interests of ALL copyright holders. It also would enable the RIAA to get what it claims to want - the high prices it claims its recordings are worth.

But the fact of the matter is, if such a proposal was put forth, the RIAA would fight it tooth and nail. A free marketplace is the LAST thing they want - because they know they cannot survive in one.

SoundExchange and the RIAA is lying through its teeth when it says that Internet radio airplay does not have value. Who gets airplay and who doesn't is the only thing this royalty battle is about. The RIAA wants to make sure that only the mass market products of the Big Four get Internet airplay - which is why it has tried to use the SoundExchange monopoly to price everyone else out.

If a free market were to come about and the RIAA charged the sort of rates that they have pushed through the CRB - well, Internet stations would have little choice but to pull RIAA recordings and play only those which are more affordable or, at the very least, severely restrict the number of RIAA recordings which are played. What that would do, of course, is give greater airplay and more exposure to those recordings that are not so overpriced. This, of course, would only hasten the RIAA's demise as the extra exposure would enable audiences to discover artists that they most likely would not have otherwise and the RIAA's market share will decline even faster. Their only hope of being competitive in the market for Internet radio airplay would be to lower their prices to rates that make it attractive for stations to play them. The only reason they could get away with charging high prices would be if a recording is a huge hit - but if they don't get airplay on Internet radio, which will very soon replace FM as the medium where musical trends are set, they will not have any huge hits that anyone would be willing to pay high prices for. They will have priced themselves and not their competitors out of the market.

If the RIAA wants to price recordings out of the market for airplay, it should be free to do so - but only with its OWN recordings and not everybody else's. If the RIAA does not wish to participate in Internet radio - well it shouldn't have to. It can stand on the sidelines and become even more obsolete as Internet radio becomes more and more important in people's daily lives and in our culture. But it does NOT have a right to determine the conditions and terms that its emerging competitors must operate under in order for them to participate in the many wonderful things that Internet radio has to offer. Quite frankly, we need a system where the RIAA has to play by the same rules that everybody else does and where it has absolutely no more status or privilege in the eyes of the law and the government than does any other copyright owner.

The notion of a "willing buyer and a willing seller" being determined by a GOVERNMENT PANEL is absurd. Despite the pseudo-free market verbiage, such is NOT a free market approach. A system where the GOVERNMENT determines what prices ought and ought not to be is the premise of communism/socialism and not a free market. I am actually all for prices being set by "willing buyers and willing sellers" - provided that all parties are actually willing. Perhaps certain broadcasters would be willing to pay .0019 cents to stream some recordings - but no broadcaster in his right mind would be willing to play such a price for all recordings as the vast majority simply are not worth that much in terms of attracting audiences. And perhaps the RIAA labels are willing to sell performance rights to their mega hit recordings for .0019 - but no independent artists or niche genre artist in his right mind would be willing to charge that much for airplay for the exact same reason that pencil makers do not charge $100 for an ordinary pencil. If we are going to have a "willing buyer/willing seller" strandard then it actually needs to be decided by willing buyers and willing sellers - i.e. by a free market and NOT by the RIAA on grounds that it has political pull. And webcasters and independent copyright owners should not have to be forced to spend the time, money and energy to go out and acquire their own political pull in order defend themselves from the RIAA's predatory political schemes.

The problem with the compulsory license is that it is a "one size fits all" proposition for both copyright holders and broadcasters. As a consequence, the results will never be to everyone's satisfaction: either one side or the other or both will always feel that they are being screwed. In a free market, each player makes his own decision as to what he wants to charge and to pay - and if it does not work out, then only he is to blame. Under a free market, the only party that loses is the RIAA because it is no longer able to use its political pull in order to keep a flood of emerging competitors in check. It will be forced to compete in a marketplace where it has no special advantage over anybody else and is no longer needed or even particularly wanted anymore by either artists, customers or broadcasters. Establish a genuinely free market and the RIAA is toast because, quite frankly, it no longer has anything to offer that other players in the marketplace cannot do better and much more efficiently.

Breaking News - Please Act Now

On Thursday the Internet Radio Equality Act was introduced by Representatives Jay Inslee (D-WA) and Donald Manzullo (R-IL). The bill would nullify the current Copyright Royalty Board ruling and require that future CRBs to apply the same standards in setting Internet radio royalty rates as apply to satellite radio - thus the basis for the word "equality" in the bill. It would set "transitional" royalty rates which would be in effect until the CRB royalty hearings for the years 2011-2015. The transitional rates would be either .33 cents per listener hour or 7.5% of annual revenues. The broadcaster would have to decide once each year which method of calculation he wishes to be subject to for the following year. The logic behind these rates is that they attempt to match the rate that satellite radio pays for the same royalties - thus, again, the name of the bill.

The bill also sets the annual minimum per service provider of $500 per year and instructs future CRBs that future minimum royalty rates per service provider shall not be higher than $500 per year. This is in contrast with the current CRB's demand that service providers pay a minimum of $500 PER CHANNEL - a rule that was very obviously designed to specifically bankrupt my service providers Live365 which aggregates the broadcasts of some 10,000 Internet radio stations and LoudCity which provides joint licensing coverage for several hundred stations. Both services not only provide cost efficiencies for small stations such as mine, they also take care of the extremely burdensome and complicated tacking and paperwork requirements that SoundExchange subjects Internet stations to. And, they actually make the cost of administering royalties on SoundExchange's end less burdensome as well.

I am asking that Radio Dismuke listeners and anyone else who values the wonderful variety and diversity of musical programing that Internet radio makes possible to please telephone your Representatives in Congress. Ask the person who answers to phone to please urge your Congressional representative to co-sponsor and support The Internet Radio Equality Act.

Time is of the essence. The outrageous royalties set forth by the Copyright Royalty Board will go in effect on May 15 if nothing is done. Even if the proposed rates go in effect for just one day, it will immediately bankrupt a great many small webcasters due to the fact that the rates are retroactive back to January 2006. Because of the fundamental change in the way the rates are calculated, small stations that were previously being charged $2,000 per year could suddenly be faced with retroactive royalty bills of up to $40,000 or more. If nothing is done by May 15, it is very possible that one or both of Radio Dismuke's service providers will be forced into bankruptcy and go out of business.

I read on a Live 365 message board that if 260 Representatives sign off on the bill at the desk it will pull the bill out of committee and onto the floor for a vote. So you might also ask your Representative to sign the book at the desk so that it can be brought to a vote before stations are forced to go off the air on May 15.

Unfortunately, because of my busy schedule with a full time job and the time I have had to devote on finding a way for Radio Dismuke to somehow survive under a worst case scenario, I have not been able to spend as much time on this blog as I would like to. Your best source of up-to-the-minute news on this rapidly evolving royalty siutation is going to be TheSaveNetRadio Coalition. Both of my service providers are members of this coalition as are a great many small stations and even very large operators such as Yahoo and AOL. If you go to the SaveNetRadio website, you will find a link to where you can enter in your zip code in order to get the telephone number of your Representatives office.

Please call your Representative's office today.

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.