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The Internet Media Music The Almighty Buck

Experimental Fees Settle Royalty War For Internet Radio 270

Posted by samzenpus
from the pay-the-man dept.
S-100 writes "SoundExchange has reached an agreement for royalty rates with a consortium of Internet radio broadcasters. The parties are ecstatic that the issue is finally resolved, and that the new rates are below the previous 'death to Internet radio' levels that had previously been imposed by the CARB. According to NewsFactor, Pandora founder Tim Westergren proclaims that 'the royalty crisis is over!', and other large broadcasters are equally pleased. One unheard-from group is less likely to be pleased: small Internet radio broadcasters. Buried in the details are a new minimum royalty payment: $25,000 per year. So say goodbye to all of the small Internet radio stations that you have been listening to, as they will no longer afford to operate legally."
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Experimental Fees Settle Royalty War For Internet Radio

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  • Social corruption (Score:5, Insightful)

    by Futurepower(R) (558542) <MJennings.USA@NOT_any_of_THISgmail.com> on Wednesday July 08, 2009 @10:01PM (#28631295) Homepage
    The rich take advantage of the less rich:

    "Buried in the details are a new minimum royalty payment: $25,000 per year. So say goodbye to all of the small Internet radio stations that you have been listening to, as they will no longer afford to operate legally."
    • So say goodbye to all of the small Internet radio stations that you have been listening to, as they will no longer afford to operate legally."

      Perhaps -- On the other hand, people who make music available without royalty (thus staying outside of the CARB system) -- such as Creative Commons licenses, or even non-CC licenses which simply explicitly allow On-Air radio stations that aren't part of CARB to play them -- might find themselves with a boon as they will then be the only music that small radio stations will be able to play.

      If I was a small (or even not-so-small) musician that wanted my music to get play, I'd probably release my music on a license that allowed people who haven't signed up for CARB to play my music royalty free, but had standard fees for stations that had paid the CARB $25K minimum (I mean, why give up royalties that have already been allocated to me?).

      That way, smaller stations can play my music, and the larger stations (that really make money) can give me my fair share of CARB royalties if/when I get big enough to attract the attention of the larger stations.

    • by GigsVT (208848)

      ...using the coercive power of government.

    • Who says that an agreement between one set of parties binds others who were not party to the agreement? I fail to see how an agreement between certain parties in this mess affects other parties who are not signatory to the agreement. That doesn't make any sense.
      • They plan on using the power of government to enforce the agreement.

        However, the Slashdot story seems to be in error. The amount should be $500, not $25,000, apparently [slashdot.org].
      • by Alsee (515537) on Thursday July 09, 2009 @01:42PM (#28639219) Homepage

        Who says that an agreement between one set of parties binds others who were not party to the agreement?

        Congress created copyright law, and by law a copyright holder can sue you in court for copyright infringement, and the courts will enforce it and if necessary bring in gun-toting police to enforce the authority of the court.

        But then it gets more complicated. Congress passed a new law specifically to deal with "internet radio" webcasting. This law set up something called CARP - the Copyright Arbitration Royalty Panel - an the law authorized this panel to listen to industry lobbyists and set "reasonable" copyright payment rates for webcasters. The panel was directed to set the rates according to what willing-buyers and willing-sellers would agree to pay on their own under normal free market conditions. The payment rates set by this panel have the force of law.

        What then happened is that the RIAA represents a multi-billion dollar industry with huge influence in Washington and with an army of lawyers and with an army of lobbyists and with effective monopoly power to dictate manipulative contract terms. The RIAA then made a deal with Yahoo (and maybe one or two others others) to license Yahoo to webcast the RIAA's copyrighted music. The RIAA manipulated this deal to inflate the apparent royalty rate. The RIAA then submitted this inflated rate to CARP, as evidence of the "natural free market price that willing-buyers and willing-sellers would reach on their own", and the RIAA used all their industry power and Washington influence to influence the CARP process. Webcasting - being brand new and mostly small upstarts and things like college radio - their interests had little or no representation before the CARP panel, and of course they got STOMPED. CARP set impossibly high royalty rates webcasters had to pay. It set impossibly high rates that would exterminate both small and large webcasting. Rates that effectively prohibited any sort of internet radio.

        Webcasters, both large-and-small, found themselves faced with retroactive bills they would have to pay, bills far larger than than any money they had and larger than any gross-revenues coming in from webcasting. College radio and similar small and indie webcasters would get smacked with huge retroactive bills and shut down, and larger webcasters would literally have to file for bankruptcy. Webcasters large and small all screamed that the CARP set unfair and impossibly high rates, and they increasingly got their act together as an "interest group" to challenge the CARP ruling, and it appears they were going to be successful in having to reversed.

        The RIAA then made a NEW deal with large webcasters. A deal that eliminated the impossibly high per-song-per-listener fee, and allowed them to pay according to a completely different and lower cost payment system While this was a "private contract", according to the CARP system other webcasters would also have the right to opt-in to those terms if they wanted to. The terms of this contract set a vastly higher minimum fee specifically to lock out smaller webcasters. The original CARP system had a $500 minimum payment for college radio and other indie webcasters (with per-song-per-listener fees going up from there), the new deal set a $25,000 dollar yearly minimum fee.

        So the RIAA has effectively split the webcaster interest group that were fighting to get the CARP rates reversed. The RIAA gave the large webcasters a deal they could survive with, and effectively eliminated the "big muscle" on the webcaster side fighting the original CARP rates. College radio and other indie webcasters lose the little corporate support and legal support and Washington lobby influence they had. The small webcasters are unlikely to be able to effectively oppose the CARP ruling on their own, and will likely be exterminated.

        So small webcasters are *not* bound by this particular agreement, but they are still bound by the CARP panel fees backed by the force of Congressional law. In fact small webcaster

  • by kalpol (714519) on Wednesday July 08, 2009 @10:06PM (#28631335) Homepage
    Just theoretically, what if a station played only music in the public domain? Would they have to cough up the minimum payment? I'm curious whether the fee is for playing music over the internet, or for playing copyrighted music over the internet.
    • by wikki (13091) on Wednesday July 08, 2009 @10:13PM (#28631381)

      This would only apply to record labels or artists covered by SoundExchange.

      Basically it's part of the RIAA so you have the Big 4. Sony EMI, Universal, and Warner.

      There may be some others.
      http://en.wikipedia.org/wiki/SoundExchange#Business_structure_and_oversight

      • by afidel (530433) on Wednesday July 08, 2009 @10:41PM (#28631615)
        Actually SoundExchange is THE collection agency for streamed royalties in the US, even indie artists have to collect through them unless they negotiate other contracts which is very difficult to do as it involves lawyers and lots of paperwork to opt out of SoundExchange and they would still collect royalties through SoundExchange for any webcasters they didn't have direct agreements with.
        • by RareButSeriousSideEf (968810) on Wednesday July 08, 2009 @11:41PM (#28632093) Homepage Journal

          This is probably the most important (and most likely to be overlooked) point in the whole issue. Artists cannot opt-out. Even artists who have never heard of SoundExchange and have never received a check *from* them are generating revenue *for* them.

          This might just be a good issue around which to construct a test case for the judicial system. With good legal counsel close at hand, create a station which exclusively plays content that is offered under a suitably free license (http://openmusic.linuxtag.org/, http://www.danosongs.com/ [danosongs.com], insert your better suggestion ___ here), or where your station has a separate agreement with the artist, or where the artist is not receiving royalties from SoundExchange (and perhaps thinks he/she should be on the basis that SE has collected them from broadcasters).

          Publicize, grow, attract attention belligerently.

          SoundExchange *seems* to claim to represent all of these scenarios under the "no opting out" doctrine. There is no music "outside of their catalog" as they have no catalog, just an "all your music are belong to us" clause.

          In the first two cases, open licenses and individual agreements *should* trump SE's doctrine. If so, then it's time to set about creating a clearinghouse method for mass producing "individual" agreements.

          In the third case, SE is ripping off artists in a sense, and shouldn't be able to get away with it. Many small indie artists haven't a clue about SE or how to get royalties from them. Yet SE *keeps* royalties for artists who don't know how to claim them. Existing under a "no opt out" charter is reason enough that the onus should be on SE to notify artists & rightsholders of royalties they have coming.

          • Re: (Score:3, Insightful)

            by X0563511 (793323)

            I think that existing under a "no opt out" charter is grounds to have your charter revoked, under order that you rewrite it without that part, or it's completely forfeit.

            Unfortunately (and fortunately for some) I'm not important.

          • by afidel (530433)
            According to USC 17.112.e.5
            License agreements voluntarily negotiated at any time between 1 or more copyright owners of sound recordings and 1 or more transmitting organizations entitled to obtain a statutory license under this subsection shall be given effect in lieu of any decision by the Librarian of Congress or determination by the Copyright Royalty Judges.

            This should be perfectly doable, but from what I have read and heard it's almost impossible. Part of the problem is all of the different parts of
          • Re: (Score:3, Informative)

            Actually that is not entirely true. Artists are free to enter into an agreement with a "broadcaster" independent of SoundExchange. The law only prevents artists from suing for copyright infringement those "broadcasters" who have paid the SoundExchange license fee.
    • You can always license music individually with the rights owner, via for example Creative Commons, or go public domain where you can. What this deal covers is the "compulsory" license, which rights holders are obliged to accept if you want their music under those terms.
    • by jonwil (467024) on Wednesday July 08, 2009 @11:33PM (#28632037)

      It doesn't matter if you personally held the copyright to every single piece of audio played on your station. The RIAA will still insist you pay up (or at least file reams of paperwork that no small station can afford to file)

    • Re: (Score:3, Interesting)

      by johnsie (1158363)
      I run a radio station for unsigned artists. These rules don't apply to me because I have a private arrangement with the artists. The days of commercial music are coming to an end because it's too expensive and now the little guys will be getting more airtime. I think it's good for musicians, but not so good for money hunters.
  • The article seems to be dead. Is this merely music related, or does this include podcasts featuring only news? This is the first I've heard of this.
  • What are smaller broadcasters required to pay now? $2100 per month doesn't seem like a terrible amount. I guess if you are a super small station you are going to be in trouble. What about SomaFM?

    • by Neoncow (802085) on Wednesday July 08, 2009 @10:24PM (#28631459) Journal

      If I understand, that's just for the right to not be sued for broadcasting the music. Broadcasters still have to pay to buy the music, for bandwidth to stream the music, hardware to do that, people to select music, build websites themselves, manage online communities, manage advertising relationships, etc.

      AND that's the minimum. So if you have zero listeners, you have to pay $25 000 per year just to start.

  • by Ralph Spoilsport (673134) on Wednesday July 08, 2009 @10:08PM (#28631345) Journal
    In the USA maybe. I have a suspicion other countries might have a different notion of how that might work out...
  • by 1mck (861167) on Wednesday July 08, 2009 @10:09PM (#28631353)
    Does this only pertain to the US, or is it all over the world?
  • by ErikTheRed (162431) on Wednesday July 08, 2009 @10:19PM (#28631425) Homepage

    According to NewsFactor, Pandora founder Tim Westergren proclaims that 'the royalty crisis is over, and we don't have to worry about any small competitors sneaking up and taking our business!'. I may have added that last part, but I'm sure he was thinking it. Like most regulations, it serves mainly to fuck small business and eliminate competition.

    • by Apathist (741707) on Wednesday July 08, 2009 @11:01PM (#28631805)

      Why are we all so busy blaming Pandora for this?

      IIRC, they were just trying to save themselves from getting annihilated by these preposterous fees... and now we're giving them a hard time because they didn't save every other tiny internet radio station all at once?

      Seems to me that we won the battle, but not the war (yet). So let's celebrate that instead of flagellating those fighting on our side, yeah?

      • Re: (Score:3, Insightful)

        by Draek (916851)

        I'm curious, why do you consider Pandora to be on *our* side? I haven't followed this situation closely, but it seems to me they've only done their best to stay afloat and nothing else. That's to be expected from any business, but it isn't something to be praised either.

    • Creative Commons music for the people who tire of Pandora...

      http://www.jamendo.com/en/ [jamendo.com]
    • by TubeSteak (669689) on Thursday July 09, 2009 @12:11AM (#28632277) Journal

      According to NewsFactor, Pandora founder Tim Westergren proclaims that 'the royalty crisis is over, and we don't have to worry about any small competitors sneaking up and taking our business!'. I may have added that last part, but I'm sure he was thinking it. Like most regulations, it serves mainly to fuck small business and eliminate competition.

      1. This isn't a regulation, it's a cartel whose licensing terms are enforced by [government]
      2. And this $25K business sounds ripe for anti-trust investigation. How is it not abuse of a monopoly position?

      • Re: (Score:3, Interesting)

        by afidel (530433)
        Because USC 17.112 explicitly makes an exception to anti-trust law to allow the negotiation of a statutory rate structure for compulsory licensing of phonorecordings for digital distribution, this was thought of by the lawyers way back in the mid 1990's when the whole exception that allows internet radio to operate at all was started.
        • Re: (Score:3, Interesting)

          by TubeSteak (669689)

          Because USC 17.112 explicitly makes an exception to anti-trust law to allow the negotiation of a statutory rate structure for compulsory licensing of phonorecordings for digital distribution,

          Lets try and make a list of industries that have anti-trust exemptions.
          (google the name + anti-trust exemption to verify)
          1. Sports
          2. Unions
          3. Music/Movies
          4. Freight Rail
          5. Freight Ocean Liners
          6. Insurance
          7. ??

          After some googling, I discovered there's an entire book on the subject. [google.com]
          Maybe making an exhaustive list isn't the best idea after all.

      • by BlueStrat (756137) on Thursday July 09, 2009 @01:09AM (#28632555)

        According to NewsFactor, Pandora founder Tim Westergren proclaims that 'the royalty crisis is over, and we don't have to worry about any small competitors sneaking up and taking our business!'. I may have added that last part, but I'm sure he was thinking it. Like most regulations, it serves mainly to fuck small business and eliminate competition.

        1. This isn't a regulation, it's a cartel whose licensing terms are enforced by [government]
        2. And this $25K business sounds ripe for anti-trust investigation. How is it not abuse of a monopoly position?

        That's easy.

        Because many of the same people who were instrumental in putting this in place and that stand to gain from it also just happen to be the ones that would also be instrumental in deciding if it's fair or not.

        Wagers on their decision?

        Strat

         

  • by Bones3D_mac (324952) on Wednesday July 08, 2009 @10:25PM (#28631467)

    Perhaps now is a good time for all the upstart talent out there to be heard before getting their work corrupted by the recording industry. Small broadcasters should set up their own organization to collectively promote new talent by sharing their newly found content with each other for broadcasting. All that would be needed is some sort of vetting system to ensure the work isn't already owned by someone other than the artist that created it.

    • Re: (Score:3, Interesting)

      by Darkness404 (1287218)
      Sure, but that still could be a minefield. Lets say a small band in 2009 releases music that isn't covered by this. You play it thinking its safe or you had an agreement reached with the band or something. 2010 rolls around and they get signed on by Warner. Now, because Warner owns all their songs, you have little proof that the songs you play were released before then because its the same song. So you get sued. The problem with indie bands is they don't stay indie if they are decent enough.
      • by PPH (736903)

        Sure, but that still could be a minefield. Lets say a small band in 2009 releases music that isn't covered by this.

        Define 'release' from a legal perspective. If you just find some music on line, you are taking a risk downloading and playing it. Even if the performers post it there themselves. How are you to know that they have the rights to do so? Some legal title needs to be in place to define performers' ownership even when a recording label isn't involved.

        2010 rolls around and they get signed on by Warner. Now, because Warner owns all their songs,

        All their songs? What if this is a band than moved from one record label to another? The previous label would still have rights to their old work. Warner would only

  • What about SomaFM? How will this affect their royalty issues?

    • by afidel (530433)
      According to the message at the top of the news page they are $30K in the red for 1H'09 with the old royalty rates so probably not so good. If it wasn't for Pandora I would probably be sending them a couple hundred like in years past but I haven't listened in over a year.
      • by winphreak (915766)

        That's what I was afraid of as well.
        I didn't start donating until the ridiculous rates from a few years ago kicked in, but here's hoping they keep going strong.

        I'm thinking it would be best to just wait until they post on their blog about how it affects them. Either it'll be a huge sigh of relief, or a kick in the pants.

  • by binarybum (468664)

    I bet their Friggin' "Ecstatic"! Most of the big broadcasters will easily make double the fee over the next year in increased traffic from all the people that no longer can listen to the really good smaller radio stations.

  • by Hodejo1 (1252120) on Wednesday July 08, 2009 @10:32PM (#28631531)
    A big reason that traditional radio stations are in the hands of conglomerates only is because the cost of the antenna, broadcast equipment, and the scarcity of available frequency makes it extremely expensive to start a new terrestrial radio station. A Net radio station only needs a Net connection and some open source applications. The 25K means individuals are no longer able to run a free Net radio station. It will also knock out college radio stations who simultaneously stream the terrestrial broadcasts they deliver for no fee. Hobby Net radio is dead in this country. Of course, the agreement only applies to the US so overseas folk can pick up the slack...for now. A shame really and not the win Pandora calls it. It just helps the mid-sized VC-funded
    • by Darkness404 (1287218) on Wednesday July 08, 2009 @10:39PM (#28631595)
      Pandora is basically in the pocketbooks of the RIAA. Pandora is no longer the small "fight for your rights to listen to music as you wish" radio station, but rather the MS of internet radio. What Pandora calls a win for internet radio, is the same as Ballmer calling something a win for operating systems. They only see themselves and one competitor. Pandora wants all the small stations (and Last.FM) to die as much as Ballmer wants Linux and OS X to die.
  • by Jason Pollock (45537) on Wednesday July 08, 2009 @10:39PM (#28631585) Homepage

    Look at it this way. You and 99 of your friends can now have all-you-can-eat streaming music for US$250/yr + costs, as long as your costs are US$100k (royalties are 25% of costs or revenue, whichever is higher) - running it as a coop means no revenue.

    Even better, you can offer it to everyone!

    Sounds like a great way to have a large, legal, on-demand music collection.

    • slashdot ate my less than.

      "as long as your costs are _less_than_ US$100k"

      So, your cost is US$25k + Transmission and Hosting.

    • At $250/year, I could buy and OWN all the music I want in *maybe* two years time. That's being gracious. I can't think of 25 cd's produced by the MAFIAA in the last 5 years I would shell out the cash for on the *cheap* rack. It wouldn't take very many cd's to fill out what I don't already own.
  • BILLY MAYS HERE... (Score:2, Interesting)

    by BillyMays (1587805)
    With double standards! Remind me again why streaming is any different from broadcasting over radio waves?
  • Small Internet Radio Stations cannot afford the minimum $25,000 a year fee to operate.

    This is the RIAA screwing over the small business and non-profit organizations in the music business. Next I suppose they will hit up DJs for a minimum fee for $25,000 a year to play Audio CDs and MP3 files they legally own?

  • Ambiguous, too (Score:4, Interesting)

    by S-100 (1295224) on Wednesday July 08, 2009 @10:50PM (#28631699)
    Perusing the info on SoundExchange, the wording is ambiguous. In the press release, they clearly say that all "Pure Play" webcasters, small and large, are subject to the $25,000 per year minimum fee against royalties. But in another section of the web site, they list the $25,000 fee in the section for large webcasters and say nothing about a minimum fee in the following section about small broadcasters. So there's a chance that the fee may not apply to small webcasters.

    It should also be said that this "special deal" is opt-in, and not compulsory. Webcasters are still free to adopt the rate structure established earlier by the CRB, however it was those rates that caused the revolt by webcasters in the first place, since those rates are so high that a typical small station could end up owing over 100% of revenues to Sound Exchange.
  • by alexfeig (1030762) on Wednesday July 08, 2009 @11:04PM (#28631831)
    I've been listening to pandora since it came out - I'm a huge fan. I got this email yesterday... pretty interesting. Apparently I like their free service *too* much:

    I hope this email finds you enjoying a great summer Pandora soundtrack.

    I'm writing with some important news. Please forgive the lengthy email; it requires some explaining.

    First, I want to let you know that we've reached a resolution to the calamitous Internet radio royalty ruling of 2007. After more than two precarious years, we are finally on safe ground with a long-term agreement for survivable royalty rates â" thanks to the extraordinary efforts of our listeners who voiced an absolute avalanche of support for us on Capitol Hill. We are deeply thankful.

    While we did the best we could to lower the rates, we are going to have to make an adjustment that will affect about 10% of our users who are our heaviest listeners. Specifically, we are going to begin limiting listening to 40 hours per month on the web. Because we have to pay royalty fees per song and per listener, it makes very heavy listeners hard to support on advertising alone. Most listeners will never hit this cap, but it seems that you might.

    We hate the idea of capping anyone's usage, so we've been working to devise an alternative for listeners like you. We've come up with two solutions and we hope that one of them will work for you:

    Your first option is to continue listening just as you have been and, if and when you reach the 40 hour limit in a given month, to pay just $0.99 for unlimited listening for the rest of that month. This isn't a subscription. You can pay by credit card and your card will be charged for just that one month. You'll be able to keep listening as much as you'd like for the remainder of the month. We hope this is relatively painless and affordable - the same price as a single song download.



    Your second option is to upgrade to our premium version called Pandora One. Pandora One costs $36 per year. In addition to unlimited monthly listening and no advertising, Pandora One offers very high quality 192 Kbps streams, an elegant desktop application that eliminates the need for a browser, personalized skins for the Pandora player, and a number of other features: http://www.pandora.com/pandora_one [pandora.com].

    If neither of these options works for you, I hope you'll keep listening to the free version - 40 hours each month will go a long way, especially if you're really careful about hitting pause when youâ(TM)re not listening. Weâ(TM)ll be sure to let you know if you start getting close to the limit, and weâ(TM)ve created a counter you can access to see how many hours youâ(TM)ve already used each month.

    Weâ(TM)ll be implementing this change starting this month (July), Iâ(TM)d welcome your feedback and suggestions. The combination of our usage patterns and the "per song per listener" royalty cost creates a financial reality that we can't ignore...but we very much want you to continue listening for years to come.
    • by Jay L (74152) *

      about 10% of our users who are our heaviest listeners

      I wonder how many of those are "the whole office"? I know a few offices I've been to where Pandora replaced the workplace radio. There must be a reason we were daily reminded that "The station you listen to all day, every day at work is WRQX". Those listeners belong to Pandora at the moment, but I don't think anyone's going to be paying for the privilege.

      • by afidel (530433)
        That's not even legal to start, the compulsory licensing for digital distribution does *not* cover public performance in a place of business. There's a reason Musak is so popular, there are really complicated sections of the copyright statutes covering that are of performance. Basically ASCAP and BMI both want to get their due for the public performance of copyrighted works.
  • Why not broadcast the music and the "DJ" separately? The DJ says, "Here's a song you'll like" and sends a JSON packet to your browser, telling it to (a) listen to it on Pandora or Last.fm or something, and (b) switch back to the DJ when the song is done.

  • Reason: Payola! (Score:4, Insightful)

    by Hurricane78 (562437) <(deleted) (at) (slashdot.org)> on Thursday July 09, 2009 @05:06AM (#28633651)

    I bet the only reason it got cheaper now, is because those "big" radios finally bought into Payola.

    For $25,000 they now can play everything they want, as long as it's what the RIAA tells them to play.

    Luckily, I and my Internet radios never cared, and never will!

    Some of them are even illegal by government rules (like the idiotic UK laws), which makes them real analog "pirate" radios too!

    But I either listen to them or to my mp3s. I could never go back to that pop shit that is "normal" radio stations. My musical knowledge of rare bands of the UK, Russia, Japan, UK, France, etc, grew massively since I listen to Internet radio. To me it's the second most important killer feature of the Internet. Right after porn!

  • by Tikkun (992269) on Thursday July 09, 2009 @09:02AM (#28635145) Homepage
    the more potential working business models will slip through your fingers.

    Innovation is made possible by lowering barriers to entry, not raising them.

Our business in life is not to succeed but to continue to fail in high spirits. -- Robert Louis Stevenson

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