R23 Information Services #99

Casey Kasem Retires at 77

Online radio stations strike big deal on royalties
AP

The Death of Traditional Media (same day as MJ)
McVay media

Why Should Webcasters Pay 25% Of Revenue To Promote Musicians?
techdirt

Pandora Limits Users To 40 Hours Per Month
hypebot

Radio23 Information Services #74

How Apple will kill satellite radio this summer

Internet access in Ford trucks. Cars far behind?

Australia To Build $31 Billion Broadband Network

PSP tutorial - Internet Radio feature

Singapore's internet radio streaming dries up

Radio23 Information Services #71

A Step-by-Step Guide to Webcaster Royalties commlawblog

Fourth-generation knockdown! WiMax vs LTE arstechnica

Sirius Streaming Radio Not Working For Some Customers consummerist

Skype, the Web Phone Giant, Brings Cheap Calls to Cellular nytimes

Web radio bill passed

From Ben Sisario Oct. 1 in The New York Times:

Internet radio services are breathing a sigh of relief after the Senate approved a bill on Tuesday that would allow them to renegotiate a royalty rate that Web broadcasters say is too high. By law, Web sites like Pandora.com and Live365.com have to pay the performers and owners of the recordings they broadcast, and have been in a tug-of-war with record companies over the size of these payments. (Songwriters and music publishers are paid a royalty by radio stations and Web broadcasters; Web broadcasters also pay the performer.) Under the terms of the Webcaster Settlement Act, which was passed by the House on Saturday and now goes to President Bush for his signature, Web broadcasters have until Feb. 15 to negotiate with SoundExchange, the agency that collects and distributes the royalty. Under the current rate set by federal statute last year, said Tim Westergren, one of Pandora’s founders, his site has had to pay 70 percent of its gross revenue for this performance royalty, and will have to shut down if it is not reduced.

Briefing dates set on internet radio royalty court appeal

From David Oxenford in Broadcast Law Blog:

The US Court of Appeal for the District of Columbia has set the briefing dates on the appeal filed by various webcasting groups seeking review of the decision of the Copyright Royalty Board setting Internet radio royalties for the period 2006-2010 for the use of sound recordings (see our coverage of this controversy here, and a detailed summary of the CRB decision here). The briefs of the various webcasting groups who appealed are due on February 25. The brief for the CRB (represented by the Department of Justice) is due on April 25, and that of SoundExchange (the "Intervenor) will be filed on May 15. Reply briefs are due on June 12, and oral arguments are yet to be scheduled. As the Court usually takes a summer break in July and August, the argument is likely to be held in the Fall of 2008, and a decision would likely not come until very late in the year or, more likely, in 2009.

Appeals were filed by the a number of groups including large webcasters (including AOL, Yahoo and DiMA), the small commercial webcasters, various noncommercial groups (including two collegiate broadcasting groups and the National Religious Broadcasters Noncommercial Music Licensing Committee), and various commercial broadcasters who also stream their signals on the Internet. A group called Royalty Logic, which is seeking to become a collective that is competitive with SoundExchange, also filed an appeal of the CRB decision.

Already, there has been a settlement announced on one narrow aspect of the case, the minimum fees for companies that stream multiple channels, limiting the per company minimum fee to $50,000. Obviously, if there are other settlements, these appeals could become unnecessary in whole or in part.

Another offer from SoundExchange - still not a solution

From Broadcast Law Blog:

Yesterday, SoundExchange sent to many small webcasters an agreement that would allow many to continue to operate under the terms of the Small Webcaster Settlement Act as crafted back in 2002, with modifications that would limit the size of the audience that would be covered by the percentage of revenue royalties that a small webcaster would pay. A press release from SoundExchange about the offer can be found on their website by clicking on the "News" tab. This is a unilateral offer by SoundExchange, and does not reflect an agreement with the Small Commercial Webcasters (the “SCWs”) who participated in the Copyright Royalty Board proceeding to set the rates for 2006-2010 and who are currently appealing the CRB decision to the US Court of Appeals (see our notes on the appeal, here). The SoundExchange offer, while it may suffice for some small operators who do not expect their businesses to grow beyond the limits set out in the SWSA (and who only play music from SoundExchange artists - see the limitations described below), still does not address many of the major issues that the SCWs raised when SoundExchange first made a similar proposal in May, and should not be viewed by Congress or the public as a resolution of the controversy over the webcasting royalties set out by the CRB decision.

The proposal of SoundExchange simply turns their offer made in May, into a formal proposal. It does not address the criticisms leveled against the offer when first made in May, that the monetary limits on a small webcaster do not permit small webcasters to grow their businesses – artificially condemning them to be forever small, at best minimally profitable operations, in essence little more than hobbies. The provisions of the Small Webcasters Settlement Act were appropriate in 2002 when they were adopted to cover streaming for the period from 1998 through 2005, as the small webcasters were just beginning to grow their businesses in a period when streaming technologies were still new to the public and when these companies were still exploring ways to make money from their operations. Now that the public has begun to use streaming technologies on a regular basis, these companies are looking to grow their businesses into real businesses that can be competitive in the vastly expanding media marketplace. The rates and terms proposed by SoundExchange simply do not permit that to occur.

To receive investment necessary to grow, the SCWs cannot be limited to $1.25 million in revenue. No investor will invest in a business which, when it reaches an artificial revenue threshold, essentially is forced to go bankrupt – as all projections show that the CRB royalties would exceed total revenue of a SCW even if it makes more than $1.25 million in revenue.

The new restriction added in this offer by SoundExchange, one that requires a small webcaster to pay at the CRB rate for all listening that exceeds 5,000,000 aggregate monthly tuning hours, would already have some SCWs paying substantial sums in addition to the percentage of revenue royalty. And, at the growth rates projected for some SCWs, the amount necessary to pay such overages could exceed the $1.25 million revenue threshold – exceeding the amount of revenue that a small webcaster is allowed to earn under the SWSA provisions.

Even more importantly, it must be noted that the offer by SoundExchange does not allow a webcaster to play all music for their 10-12% of revenue as did the Small Webcaster Settlement Act – it only allows them to play music of SoundExchange members. For all music from artists who are not SoundExchange members, the full CRB-determined royalty would have to be paid. Thus, a webcaster will have to assess its music choices, and play only the songs released by SoundExchange members (principally the major labels and some independent labels) rather than the diversity of music from small labels and independent artists, the kinds of music that the statutory royalty was supposed to make easier to play through the “one-stop shop” that a statutory license provides to an Internet radio service.

SoundExchange has informally indicated that it will continue discussions as to the concerns of the SCWs. The only way to resolve these issues is through meaningful negotiations, or through legislation like that proposed in the Internet Radio Equality Act. Unilateral proposals simply don’t address all the issues that have caused so much outrage over the CRB decision. In order for these independent companies to build profitable businesses that will promote music and be able to pay reasonable royalties, something more than what SoundExchange has offered must be available.

Webcast royalty bill, negotiations hit impasse

From Eliot Van Buskirk in Wired:

A federal bill that would reset music royalties at a more affordable rate for thousands of internet radio stations is losing steam in the House of Representatives, raising new fears for the future of webcasting.
First-time webcasting fees proposed by recording industry royalty-administration group SoundExchange took effect last month, setting off a wave of protests and last-minute negotiations aimed at reducing the hit for smaller webcasters and capping rates for sites that support hundreds of customized stations.
Negotiations are ongoing, but chances of broad legislative relief in the form of the Internet Radio Equality Act, or IREA, are fading fast, according to several people familiar with the effort. Rather, Congress appears resolved to let SoundExchange and the various strata of webcasters negotiate individual settlements.
"We met with members of the House and Senate judiciary committees this week, and while they all were supportive of small webcasters, time after time we heard the IREA was not going to pass," said Rusty Hodge, founder of webcaster SomaFM.
A legislative setback could make it harder to dislodge the new fees, which took effect last month after a federal appeals court refused to postpone the payment deadline. With the threat of congressional backlash fading, SoundExchange could find little incentive to budge from its current position.
The importance of legislative pressure in the negotiation process was underscored late Thursday. In a joint statement, Sens. Ron Wyden (D-Oregon) and Sam Brownback (R-Kansas) said they were "troubled by the lack of negotiating progress" and promised to take action to push the IREA bill forward if agreements are not made by Sept. 3. Given the lack of support in the House, however, the chances of the bill becoming law currently look remote.
SoundExchange has already proposed changes that could relieve small and custom-streaming sites from charges they could not possibly afford to pay, at least in the short term. Many expect a small-webcaster deal to be done by early September, when Congress goes back into session. But the deal on the table hasn't changed since SoundExchange extended an offer in May to charge them 10 percent of gross revenue under $250,000, or 12 percent of gross revenues over $250,000, with a revenue cap at $1.25 million.
Webcasters say they are wary of the deal because of a provision that would shift webcasters from the percentage rate to the higher per-stream rate once they exceed certain usage caps.
"That's the sticking point," said SomaFM's Hodge. "In our optimistic projections, SomaFM won't hit the revenue cap for a couple years, (but) when we hit it, our royalties would go from $150,000 a year to over $2 million a year. "
For larger webcasters, such as custom-streaming site Pandora, coming to terms could take longer. Talks are ongoing over a proposal to cap per-station fees, but Tim Westergren, co-founder of Pandora, said there has been "no material change -- we're in a slow negotiation process now."
Reaching a settlement with SoundExchange could take even longer for the largest webcasters, which have been given no hint of a deal beyond the current Copyright Royalty Board rates. In the absence of any alternative, they will likely seek to strike deals directly with the major labels rather than accepting SoundExchange's mandatory license.

Will Web radio stations be forced to combat copying?

From Farhad Manjoo in Salon:

Late last week SoundExchange, the recording-industry group that collects royalties from Internet radio stations, agreed to limit one key part of the new fees that threatened to shut down a great many webcasters. But now it seems that SoundExchange's benevolence came at a price: in exchange for reducing fees, the recording industry wants webcasters to prevent listeners from copying the music they get through Internet radio -- despite the fact that such copying may be perfectly legal.

SoundExchange had previously asked radio stations for $500 for each channel of music that they send out to listeners, a fee that would have added up to more than a billion dollars for the industry. On Friday, the royalty group agreed to cap the amount at $50,000 per webcaster. The fee cap all but saved Internet radio from certain death.

As Ars Technica points out, though, SoundExchange says in a press release that it will only extend the deal to webcasters who "work to stop users from engaging in 'stream ripping' -- turning Internet radio performances into a digital music library."

Stream ripping refers to the practice of recording songs from an Internet feed. Several programs -- StationRipper, RadioLover, Streamripper, among others -- make this a pretty easy process. Once your record a song from an Internet radio channel, you can play it like any other MP3, in any order you choose, without logging back in to the webcaster's stream. Considering how easy that sounds, some industry observers have speculated that people who were scared off by file sharing may be moving to stream ripping as an alternative source of free music online.

But there isn't much firm data about the practice. The recording industry has trouble estimating how many music files are traded illegally online, but recording a Web radio stream, like recording a show on TiVo, occurs off the network, in the privacy of your own computer. And even if stream ripping is widespread, it's not clear what radio stations can do to stop it. Stream rippers work by capturing the music going straight to your PC's speakers, in much the same way that your TiVo or your VCR copies video as it flies between your cable box and your TV. Copy-protection programs simply can't stop this sort of copying.

And though legal opinion is unsettled on the question, many copyright experts argue that stream ripping, like recording TV shows on your VCR, is legal. All you're doing is "time shifting" -- recording something at Time A to play back (for yourself) at Time B.

Like the music industry, Web radio stations aren't big fans of stream ripping. They'd rather have you come back to their site each time you want to listen to music. But many also stay away from the main methods to combat ripping -- webcasting at a lower bitrate, mixing promos and jingles over the music, crossfading songs so they don't start and end cleanly.

You have to wonder if the recording the industry -- now that it's got webcasters locked in negotiations for their future -- will have any trouble imposing such reduced-quality streams.

Legislation introduced to postpone internet radio royalty rate increase

From a press release from Nydia M. VelÃzquez:

Last night, Chairwoman of the Committee on Small Business, Nydia M. VelÃzquez and Ranking Member Steve Chabot came together to introduce bi-partisan legislation in a final attempt to postpone the implementation of new royalty rates for webcasters and allow additional time to find a solution. The new rates put into place by the Copyright Royalty Board (CRB), are scheduled to go into effect this Sunday, July 15 and many caution that their implementation will mean the end of the industry for Internet radio. Efforts to reach a compromise have not yet been successful, and this legislation, HR 3015, would delay implementation of the rate increase by 60 days, allowing continued negotiation so a satisfactory arrangement can be reached.

"We are coming down to the wire on this issue, and as the royalty rates currently stand, I am concerned that webcasters and musicians alike will be harmed, perhaps even irreparably," said Chairwoman Velázquez. "There has not yet been an agreement reached that provides fair compensation to artists while allowing broadcasters to stay on the air without excessive fees. I urge my colleagues to support this bill to allow an opportunity for that compromise to be reached."

H.R. 3015 would postpone the implementation of the CRB decision for two months, allowing internet broadcasters and the music industry more time to come to a suitable compromise. Under the current fee structure, firms pay a percentage of their revenue, a system beneficial to small companies with lower profit margins. The new regulations would designate a flat fee that must be paid each time a song is played. For many small broadcasters, this would drastically increase their costs and some industry insiders have projected that royalty payments will more than double. The new fee system will also cover all broadcasts since January 1, 2006, leaving webcasters open to high back payments and possible legal action for unauthorized public performance. H.R. 3015 would maintain the current revenue based system for 60 days past the July 15 deadline, during which time, a more equitable system can be agreed upon. VelÃzquez and Chabot sent letters to the Chair and Ranking Member of the House Judiciary Committee, urging them to adopt this legislation. A letter was also sent to Sound Exchange and the Digital Media Association advising the groups to use the 60 days to make earnest negotiations.

"The July 15 implementation date of the CRB's ruling is making on-going negotiations more challenging," said Congressman Chabot. "During last month's Small Business Committee hearing on this issue, there was a consensus among the Committee Members that it would be preferable to have this matter resolved between the parties. This legislation creates a positive environment to encourage continued dialogue and negotiation."

The Committee held a hearing on June 28 to hear testimony on the impact the CRB decision will have on internet broadcasters, musicians and record labels. Both sides of the issue came to the table and the consensus was that fair compensation to musicians was crucial, but that the royalties as they currently stand could be prohibitively expensive for small internet broadcasters. Additionally, independent musicians voiced there support for internet radio, citing its promotional value,
as most terrestrial radio stations limit their broadcasts to mainstream
artists.

"We must find a solution that will satisfy both sides of this issue, and a little more time may be all that is necessary," Chairwoman VelÃzquez said. "It is critical that we take steps to ensure that small internet webcasters continue to thrive."

Latest webcasting royalty developments

From Broadcast Law Blog:

The past few days have been eventful ones in the battle over Internet radio royalties. Appeals from the decision of the Copyright Royalty Board decision (see our memo explaining that decision, as well as our coverage of the history of this case) were submitted by virtually all of the parties to the case. In addition, the National Association of Broadcasters, which had not previously been a party to the case, filed a request to intervene in the appeal to argue that the CRB decision adversely affects its members. Also in Court, a Motion for Stay of the decision was submitted, asking that the CRB decision be held in abeyance while the appeal progresses. The "appeals" that were filed last week are simply notices that parties dispute the legal basis for the decision, and that they are asking that the Court review that decision. These filings don't contain any substantive arguments. Those come later, once the Court sets up a briefing schedule and a date for oral arguments - all of which will occur much later in the year. As the CRB decision goes into effect on July 15, absent a Stay, the appeal would have no effect on the obligations to begin to pay royalties at the new rates.

The Stay was filed by the large webcasters represented by DiMA, the smaller independent webcasters that I have represented in this case, and NPR. To be granted a stay, the Court must look at a number of factors. These include the likelihood that the party seeking the stay will be successful on appeal, the fact that irreparable harm will occur if the stay is not granted, the harm that would be caused by the grant of a stay, and the public interest benefits that would be advanced by the stay. The Motion filed last week addressed these points. It raised a number of substantive issues including the minimum per channel fee set by the CRB decision, the lack of a percentage of revenue fee for smaller webcasters, and issues about the ability of NPR stations to track the metrics necessary to comply with the CRB decision. The Motion raised the prospect of immediate and irreparable harm that would occur if the decision was not stayed, as several webcasters stated that enforcement of the new rates could put them out of business.

SoundExchange will have the opportunity to respond to the Motion, and the Court will then consider its merits. Watch to see a decision on the Motion by July 15. In addition to the actions in Court, SoundExchange publicized an offer of settlement made to noncommercial webcasters, an offer which was similar to that made to small webcasters (summarized here) - extend the provisions of the Small Webcaster Settlement Act until 2010, with a few tweaks. The SWSA for noncommercial webcasters required fees of between $250 and $500 per year for each noncommercial webcaster, as long as the webcaster had less than 146,000 aggregate monthly tuning hours of listening. If the webcaster exceeded that listening, it would pay at the rate of .251 cents ($0.00251) per aggregate tuning hour over the limit. The SoundExchange offer suggested a few tweaks, including requiring that noncommercial webcasters provide records of use of sound recordings - something not required under the SWSA. The current requirements for Internet radio recordkeeping are summarized here.

The offer was made to a number of noncommercial webcasting groups, so there will need to be negotiations before any deal is final. And as NPR had its own deal arrived at outside of the SWSA framework (a deal that is not public), they may well have concerns with this proposal which requires the same sort of record keeping about which its has expressed concerns in the Motion for Stay.

SoundExchange's dirty dealings

From Liz Berg via WFMU Beware of the Blog:

The battle between webcasters and SoundExchange (webcasting royalty collectors) is still raging over royalties. Earlier this year, the Copyright Royalty Board approved a hike in webcasting royalty fees so large that the increase would put many online stations out of business. An enormous backlash erupted from webcasters large and small, commercial and non-commercial, backed by the Save Net Radio campaign. NPR asked the CRB to provide an exception to the rates for non-commercial stations with large online audiences, but this was denied. Congress eventually caught wind of the storm, and wrote up a few bills to nix the CRB's rates, but no further progress has been made. In a surprise move, the CRB pushed the inception of their new rate scheme forward a few months, but as July 15 creeps up, few negotiations have taken place between webcasters and SoundExchange.

The few settlement offers that SoundExchange did offer up to webcasters are, unfortunately, useless to the vast majority of stations that will be affected by the rate hike. I imagine that Congress pressured SoundExchange to work something out, and in return SE wrote up a few PR-driven "deals" to get the Reps and Senators off their asses. Here are the details of SE's bum deals:

1. Small webcasters running on less than $250k/yr will pay 10% of their revenue to SoundExchange, and those with revenue up to $1.25 million will have to pay 12%. Any station with a budget over $1.25 million will be charged as per the CRB's new rate scheme. This sounds like a good deal, until you consider the fact that satellite radio companies XM and Sirius pay the highest royalties out of anybody, and their rate is only 7.5% of annual revenue. And 12% is supposed to be a "deal" for fledgling businesses? Here's the story.

2. SoundExchange offered a "private agreement" to a few NPR-affiliated non-commercial webcasters. They'll be charged a low royalty rate, provided that they don't have a large listenership. If they have more than 200 simultaneous listeners on their stream, the fees increase significantly. Trouble is, if your station wasn't part of the "private agreement", this "deal" doesn't apply.

In the meantime, NPR has filed a court request for an emergency stay on the CRB's new rates. Let's hope that SE comes up with a reasonable compromise for small webcasters and non-commercial stations soon...

Final decision of the CRB issued and royalty due date is postponed

From Broadcast Law Blog:

On the same day that many webcasters were on Capitol Hill lobbying for the Internet Radio Equality Act, the Copyright Royalty Board issued its Final Determination of Rates and Terms today, and it was published in the Federal Register. That action starts the clock ticking on appeals which must now be filed in 30 days. In the Final Determination, the Board included a few revisions in its initial decision, reflecting the issues that it addressed in response to the Rehearing motions - including provisions adding a transitional period of two years during which webcasters can pay using an Aggregate Tuning Hour formula instead of paying based on each performance. Surprisingly, the Board also amended the rules that it adopted governing the timing of the first payment under the new royalty rate, making the first payment due 45 days from the end of the month during which the Final Determination was issued. As the decision was issued today, May 1, that would delay the due date for the first payments under the new royalties until July 15.

The statute governing the Copyright Royalty Board allowed the Library of Congress to review the CRB decision to determine if the Librarian (through the Copyright Office) saw any obvious errors of law. Apparently, the Librarian found none (though that does not mean that there are not issues that can be raised on appeal), leading to the publication of the decision in the Federal Register. Appeals are due 30 days after that publication. On that date, parties file a Notice of Appeal, which provides notice to the Court of Appeals that parties believe that the decision was in error. After those notices are filed, the Court will set briefing schedules and oral arguments. The appeal process that can take a year or more before a decision is rendered.

Lawmakers propose reversal of Net radio fee increases

From Anne Broache on c\net news.com:

A bill introduced in Congress Thursday aims to overturn a controversial royalty fee increase that Internet radio advocates say threatens to cripple their services.

The "Internet Radio Equality Act," introduced by Reps. Jay Inslee (D-Wash.) and Don Manzullo (R-Ill.), would invalidate a March 2 decision by the U.S. Copyright Royalty Board that calls for raising royalty rates paid by Net radio operators.

"You can't put an economic chokehold on this emerging force of democracy," Inslee said in a statement e-mailed by a spokeswoman. "There has to be a business model that allows creative Webcasters to thrive and the existing rule removes all the oxygen from this space."

The bill's introduction comes less than two weeks after the CRB declined to reconsider most of its decision. Small Webcasters, National Public Radio, Clear Channel Communications and others had filed petitions for a rehearing. Some have indicated they are considering filing an appeal of the rules in court.

If it were to stand, the CRB's existing ruling (PDF) would result in fee increases on Internet radio operators ranging from 300 to 1,200 percent between 2006 and 2012, according to a group called SaveNetRadio, which has been lobbying Congress for relief.

Specifically, the rules call for rate increases of .08 cents per song per listener retroactive to 2006. They would also climb to .19 cents per song by 2010, which amounts to a 30 percent increase per year. Each station would also have to hand over a minimum $500 royalty payment under the ruling.

The congressmen said they had already received more than 1,000 e-mails and letters opposing the decision.

In addition to repealing that regime, the new House bill offers a compromise: It would set the rate at 7.5 percent of the Webcaster's revenue "directly related to" its transmission of sound recordings, or 33 cents per hour of sound recordings transmitted to a single listener. It would be up to the Webcaster to decide which model to use. That rate would also apply to satellite and cable radio operators, Inslee's office said in a statement.

The proposal drew applause from SaveNetRadio, whose members include Internet radio listeners, Webcasters and artists.

"This bill is a critical step to preserve this vibrant and growing medium, and to develop a truly level playing field where Webcasters can compete with satellite radio," said organization spokesman Jake Ward.

The bill also calls for public radio broadcasters to submit a report to Congress on how to determine rates for their class of services. Andi Sporkin, NPR's vice president of communications, called that idea a fair solution that is consistent with more than 30 years of copyright law, which "has recognized that public radio has a very different mission from commercial media and cannot pay commercial-level royalty rates."

Representatives for SoundExchange, the nonprofit entity that collects the fees and lobbied for the royalty rate changes, said they were still reviewing the bill and had no comment on Thursday.

The organization in the past has defended the CRB's decision as an appropriate way of ensuring artists are adequately compensated when their work is broadcast over the Internet.

The end of internet radio?

From Daniel McSwain in Radio and Internet Newsletter:

The Copyright Royalty Board (CRB) has announced its decision on Internet radio royalty rates, rejecting all of the arguments made by Webcasters and instead adopting the "per play" rate proposal put forth by SoundExchange(a digital music fee collection body created by the RIAA). RAIN has learned the rates that the Board has decided on, effective retroactively through the beginning of 2006. They are as follows:
2006
$.0008 per performance
2007
$.0011 per performance
2008
$.0014 per performance
2009
$.0018 per performance
2010
$.0019 per performance

A "performance" is defined as the streaming of one song to one listener; thus a station that has an average audience of 500 listeners racks up 500 "performances" for each song it plays. The minimum fee is $500 per channel per year. There is no clear definition of what a 'channel' is for services that make up individualized playlists for listeners. For noncommercial webcasters, the fee will be $500 per channel, for up to 159,140 ATH (aggregate tuning hours) per month. They would pay the commercial rate for all transmissions above that number.

Participants are granted a 15 day period wherein they have the opportunity to ask the CRB for a re-hearing. Within 60 days of the final determination, the decision is supposed to be published in the Federal Register, along with any technical corrections that the Board may wish to make. Within 30 days of publication in the Federal Register, it can be appealed (but only by the participants) to the U.S. Court of Appeals of the District of Columbia.