The decision was so one-sided that the staggering new rates are retroactive to January 1st, 2006.
When these retroactive royalty payments come due in mid-July many webcasters will be silenced by a financial burden even the biggest online broadcasters cannot afford. For independent artists and labels, the silence will be deafening and deadly.
Legal internet broadcasters already pay sizeable annual fees to ASCAP, BMI, SESAC, and SoundExchange. The fee structure already in place makes it so difficult to stay afloat that last year even WOXY.com -- one of the most popular, respected, and longest-running internet radio stations ever -- was forced to cease operations because of financial constraints. WOXY was later acquired and reanimated by the good folks at LaLa.com, but “[the new rates] absolutely would have killed WOXY as a stand-alone operation without a doubt,” said Bryan Jay Miller, general manager of the Cincinnati-based online radio station.
Many over-the-air stations also stream their broadcasts online -- this copyright royalty rate hike will likely force most if not all of them to silence their streams as well.
The Internet Radio Equality Act (H.R. 2060)
On April 30, 2007, representatives Jay Inslee (D-WA) and Donald Manzullo (R-IL) introduced the Internet Radio Equality Act (H.R. 2060), legislation that would keep internet radio alive. The bill has dozens of co-sponsors in the House of Representatives, and there is now sister legislation in the Senate known as S. 1353.
You can find out if your representative is a co-signer by visiting SaveNetRadio.org. Enter your zip code and if your representative’s contact information will appear, along with a notation as to wheter or not they are already on board.
How did the RIAA get the Copyright Royalty Board to sign off on such a clearly one-sided decision? According to the New York Times, during the proceedings a CRB judge asked if the term “albums” could refer to CDs as well as vinyl records. That quote would seem to imply a Ted "the internet is a series of tubes" Stevens-like misinformed understanding of the internet.
Why would the RIAA want to silence independent internet radio?
SoundExchange represents the four biggest record labels. These labels have controlled the music industry for years. Their ability to dominate the landscape year after year was due in large part to the unfair playing field on which smaller labels and independent arists were forced to compete.
The majors have dominated access to over-the-air radio and other music promotion outlets for decades. Then a new technology appeared that threatened to level that unfair playing field -- internet radio. Independent labels and independent artists suddenly had myriad outlets through which to get their music played widely heard.
More people gained easy access to hearing music from these independent artists and niche genres, more people spent their entertainment dollars on this music, money to which the major labels believe they entitled.
The Spread of Internet Radio
Desperate for an alternative to the boring, bland, repetitive, lowest-common-denomenator programmed stations hosted by shouting know-nothing DJs on their FM dials, computer savvy music lovers were all over internet radio. They found hundreds, then thousands of stations offering a previously unthinkable number of genres, bands, and programming choices. People listened, they liked, and they clicked on over to the iTunes Music Store, Amazon.com, and band websites to buy this new and interesting music they might not have otherwise learned even known existed.
Then there are the bands that are a little too noisy or edgy or outspoken or experimental or lyrically controversial to ever get played on regular radio – internet radio stations have provided platforms for such artists to reach new fans.
These stations included pioneers like SomaFM and Radio Paradise, as well as thousands of hobbyist-run stations streaming through the Live365 network.
Internet radio is the medium music lovers turn to hear new music. As such, internet radio has evolved into one of the best promotional tools available to independent artists and record labels who are otherwise shut out of the corporate owned networks of terrestrial radio, television, and satellite radio.
My Station, BAGeL Radio
BAGeL Radio began playing bands like Silversun Pickups, Cold War Kids, TV on the Radio, Clap Your Hands Say Yeah!, months and sometimes years before over-the-air radio started playing them.
Current BAGeL Radio staples you are likely to hear on terrestrial alternative radio in the next 12-18 months include Birdmonster, Cloud Cult, Sea Wolf, Snowden, Division Day, Blitzen Trapper, Saturna, and The Wombats.
BAGeL Radio’s local, national, and global listenership has helped numerous local acts get heard beyond the local club circuit, resulting in people attending their shows far and wide and spurring online music sales. Bands have returned from the road with stories of first-time visits to cities where people in the crowd knew the words to self-released songs having heard them on internet radio.
Local and touring bands drop in for interviews and in-studio live on-air performances including Bound Stems, The Grates, The Heavenly States, Lemon Sun, Birdmonster, Bon Savants, Matt Lutz, and more.
BAGeL Radio has also booked hosted dozens of shows featuring mainly local talent, bringing together acts that work well together musically to help them share and grow audiences. BAGeL Radio hosted series have included The California Homegrown Music Series, [RockScene], and various BAGeL Radio Presents… events.
The Big Lies
In it's presentation to the CRB, SoundExchange claimed that internet radio provides no promotional benefit to artists...if that is the case, would someone please tell me why labels send me, a small webcaster, dozens of CDs a week? The folks in the promotions departments of the labels are aware that internet radio can provide a great deal of promotional benefit to artists.
With the help of internet media, an independent band called Clap Your Hands Say Yeah! managed to sell a couple of hundred thousand copies of their debut album without the help of even a small label.
The RIAA claims that internet radio allows people to copy music for free. Well, yeah, it does...just as FM radio has done for decades! A cassette (or digital) copy of FM radio will sound an awful lot like a cassette (or digital) copy of my internet radio stream. The RIAA used the phrase fallacious phrase "perfect digital copies" (and obscenely off-the-mark description) to convince Congress to include this copyright royalty fee for internet radio (but not terrestrial radio) during the drafting of the Digital Millenium Copyright Act in 1998.
Lies-by-omission seem to be a specialty of SoundExchange, whose Executive Director John Simson said of the last time royalty rates were decided (2002), "we had the same exact response: that this is terrible, it's going to put everybody out of business. But the industry grew."
Conveniently omitted is that the now-expired Small Webcaster Settlement Act of 2002, enacted by Congress after it became evident that the new rates were murdering internet radio in it's infancy, is what enabled the industry to grow. There are no small webcaster stipulations in the SoundExchange-penned new royalty rates.
The industry argument is that copyright holders should make more money from their songs being played on internet radio. Why not terrestrial radio as well? Oh, right, because terrestrial radio, with it's two decade-long slow fade into oblivion, provides promotional benefit to copyright holders, whereas internet radio, where listenership is growing by leaps and bounds, does not.
The rapid spread of broadband internet plus the ubiquitousness of iTunes has put internet radio within a simple double-click of the vast majority of the music buying public, computer saavy or not. Did you know that 1 in 5 U.S. consumers aged 12 and over listen to internet radio?
According to Bridge Ratings & Research, the number of monthly internet radio listeners increased from 45 million at the end of 2005 to 72 million in early 2007. It really is no wonder why the majors, so used to dominating media outlets, want to do away with independent internet radio -- a medium that promotes independent bands and indie labels, local music scenes, niche genres and not, generally speaking, NSYNC and The Backstreet Boys.
Webcasters are hoping that the aforementioned tens of millions internet radio regulars are paying attention and will sign our petition and contact their Senators and Representatives. Sensible, fair legislation that refelcts the public interest, is what is needed now.
Read more detailed information at Broadcast Law Blog, SaveNetRadio.org, Live365, SomaFM, and the Radio And Internet Newsletter. For a legal look at music royalty obligations for internet radio, click here.