Photo: geodesic. Cricket sound: provided by you.

Hear that? Nothing. No, it’s not silence making a political point, as with the Internet Radio Day of Silence staged last week by web radio to protest punishing new royalty rates by showing what they could cause. This is an even more disturbing silence: as the deadline for new US rates for Net radio approaches, online radio’s supporters seem to be desperate and exhausted.

Here’s the problem: net radio supporters, concerned that new rates (and the backdated royalty rates that would be owed along with them) could kill Internet radio, haven’t exactly gotten a lot of good news lately. They’ve failed to stop the new rules in the courts: the U.S. Court of Appeals denied a “motion to stay” that could further postpone the ticking clock. And, despite overwhelming public support that jammed fax machines and stunned Members of Congress, the U.S. Congress has failed to actually bring a bill to the floor. Members were happy to co-sponsor legislation and say nice things to supporters, but not actually try to pass the legislation itself.

Barring any further action, Net radio is going to have a massive bill sitting on its desk this coming Monday. It’ll cover not only the new rates, but months and months of back-dated rates. With public broadcasting in a dire situation already, and independent music struggling to come into its own via fledgling Web outlets, that seems like really bad news.

Interestingly, one major outlet — one we’re big fans of here at CDM — disagrees. Last.fm argues that this is much ado about nothing, not because they’re a UK-based company (international broadcasters are subject to US rules — sorry, guys), but because they’ve managed to negotiate independently with the labels to get rates that work for them. That’s great — for Last.fm. But I question just how relevant this is to anyone else. Aside from the fact that not every single broadcaster can — or should have to — negotiate independently with labels, there’s also the fact that Last.fm can do its own programming around what it’s able to license. That isn’t the case for, say, a college public radio station doing a webstream of its usual programming. Given the strong material evidence presented by other broadcasters, it would seem that, despite Last.fm’s smug, broad pronouncements (ironic coming from a company owned by CBS), their situation is unique.

That means one thing: it’s time to hit the phones, Americans. (Hello, Rest of the World — while our laws may indeed wind up punishing your radio, too, I’m afraid there’s little you can do, other than call your American buddies and tell them to call.)

Call your Senators (you’ve got two of them) and your Representative (one of those). You can find the information here:

Capwiz.com Townhall Contact Info

And, as I’ve said before, there’s all the reason for independent artists to make this call. The new royalty rates in the Congressional bill aren’t perfect, but they would establish a framework for setting fair rates across media in the future. The idea is not to eliminate royalties; it’s to set it a rate that expanding media outlets can cover. More growth for listeners could ultimately mean more royalty rates. And by protecting independent online outlets, artists have an opportunity to ensure the growth of digital media as a means of promoting their work, which can funnel money into better revenue sources for us, from commissions to album sales to live music ticket sales.

For more on the indie artist perspective, see Independent Artists Fear the Demise of Internet Radio from The Baltimore Sun on (ironically) July 4.

Feel free to let us know how your Congresspeople respond here in comments. And let’s hope that this largely inactive Congress can at least bring this important debate to the floor, rather than remaining silent themselves. Wherever you stand, total inaction is the worst kind of silence of all.

  • Bjorn Westergard

    Actually, this will not impact most college radio stations, as there are exemptions for them and other sorts of totally non-commercial stations. I work at WRFL and I believe our rates are going to be around $800 a year instead of $500 now.

  • mike

    from what i have been told they cant force non US stations to pay most intend to continue 2 fingers to RIAA

  • James

    Isn't it that non-US stations can't be got at by SoundExchange if they don't have an establishment in the US?

    Just read the last.fm posts. Interesting point that Felix makes, that in the UK we have had to pay for the public performance of sound recordings for donkey's years. It seems that the US is playing catchup…

  • http://www.createdigitalmusic.com Peter Kirn

    Bjorn, do you know why some stations (like KCRW, even though it's based in College of Santa Monica) are not exempt in that way? (I believe you, but the distinctions here I find really confusing!)

    James, my understanding is that non-US stations are indeed liable. They may be less at risk for litigation, but certainly Last.fm acknowledges they are fully subject to those fees.

    This is a larger legal issue for the Web in general, which is that nothing is stopping anyone from being at the receiving end of litigation from around the world. I expect there may be some additional complexities in terms of how non-US companies are affected here, but they're certainly not exempt.

  • bliss

    Well, mike, you've been misinformed. The writing on those sheets of paper are called laws. Laws are enforced in numerous ways, the three most common ways laws are enforced are through bankruptcy, bars, and guns. Some argue that forced observance of laws amounts to nothing more than coercion. However you look at it, right now it is the RIAA who is in the position of saying, "Go ahead, make my day." Like it or not, that is it. So unless a new bill favoring Internet radio makes it to the floor and is passed by Monday, Internet radio will have to pay up or close up shop.

    My personal view is that congress is not ignoring those lists and faxes of names of Internet radio supporters. Those lists and faxes have been scanned for important names that coincide with those of Congress' financial constituency. If names representing the RIAA aren't on those lists and faxes, and they're not, or names bigger than the RIAA aren't on those lists and faxes then Congress will make its decisions based on that. That's the way the game is played these days. Lobbyists lobby for the sole purpose of getting laws passed that favor their employer's interests. The RIAA has a well financed and influential lobby in Washington, D.C., and it is clear that they do not intend to back down in favor of Internet radio or listener supported Internet radio stations. When Monday comes and the new laws go into effect it will become even more clear than it already has that it's not enough to just make a commotion anymore. At least not in the U.S. Regular folks have to make sure that their interests are well financed in order to ensure that the bills Congress pass favor them. Congress does not fear the people, Congress fears the loss of corporate sponsorship. And then there is the President who has the task of either vetoing or signing bills into law. So, if you've contributed substantially to Congress' coffers and the President's coffers, well, then you just might have the chance of seeing your interests favored by new laws. That, unfortunately, is the way the game is played these days in "the greatest nation on Earth."

  • http://www.createdigitalmusic.com Peter Kirn

    Well, in fairness, the Senate is debating Defense Appropriations today. Not sure what the House is up to, but both chambers are out of session next week. This Congress in general has been unable to reach bi-partisan agreement on anything. The fact that the Democrats won control of both chambers doesn't mean much if, aside from shifting the administrative agenda, they can't actually get anything passed. You don't need the RIAA to blame, beause Congress itself just hasn't done much. And meanwhile, a lot of the electorate is on vacation. The record lobby has the enormous advantage of having already won the CRB and Court decisions, and being able to run out the clock on the legislation. I would ring up NPR, Pandora, etc., to see what their current take is on what happens next, but I may not get a clear answer until after Monday. Not to be pessimistic here, but this just doesn't look good. I expect we'll hear more Monday.

  • James

    Peter – what I meant was that it would be extremely difficult (and expensive) for SoundExchange to enforce a judgment against a non-US webradio service. Last.fm though are now owned by CBS, so SoundExchange could sue them instead. Plus, I expect Last.fm figured that the US was important in their commercial strategy and didn't want to prejudice themselves by making enemies before they entered the market.

    But yes, for all internet companies (with some exceptions) technically they should be complying with the laws of all countries wherever their website is viewed. This is of course impossible!

    There's a broader question here though – should companies be paying per stream over the net, when on the radio they don't? The argument of the rightsholders seems to be that just because a stream can be measured, then it should be paid. Another thing – does anyone know if all digital radio stations track the number of streams that they serve?

  • http://www.createdigitalmusic.com Peter Kirn

    I hear you, James, and it's definitely an interesting question that I wish I understood better. The other feedback I got was that these really are businesses, so it's very difficult as a business to say, hey, we've got outstanding legal liability in one of the world's largest countries, but we don't care! And even when you look at groups like ASCAP and BMI, they do go out and track people down and enforce the rules. So, while I don't know the specifics, I imagine that in many cases it would be difficult just to knowingly operate illegally. Perhaps easier in other countries than the US, yes, but even then, potentially risky, unless you're really flying below the radar.

    And, anyway, obviously we don't want that … we want a whole ecosystem around promoting music that's legal and above-board, not shady, illegal international sites.

    One big myth (or at least, I'm pretty sure it's a myth) I have heard in terms of the "equality" argument was that the record labels themselves support the system of broadcast terrestrial radio being free while digital radio has this significant expense. Everything I've heard from the record labels themselves says nothing could be further from the truth. Part of the reason I think they're so aggressively pursuing these rates is that they're STILL annoyed, all these years later, that they didn't get fees in place for terrestrial radio. I understand their argument there; they just don't have a workable solution. By and large, I think they don't buy the argument that free radio play is "free promotion", (yes, even as labels continue to get snagged in payola schemes … I never said they were logical).

    I think a single rate across media really does make sense. But obviously, it only works if it works for everyone. The recent label solution, whether they were serious about it or not, was to impose a punishing rate on traditional radio, too … obviously, unpopular across the board.

    To me, though, it's even more frustrating that the whole legal apparatus here is utterly broken. CRB doesn't represent any kind of balance of interests. You never saw a careful moderation of the interests of musicians, labels, and broadcasters. Congress proved utterly ineffective. The courts seem totally clueless. You wind up with this rate structure that virtually *every* US broadcaster and even the industry association (which also represents those terrestrial radio) says will put stations out of business. Or you have a Congressional solution that in fact cuts the rates and never reaches the floor.

    Of course, this is how we now make law in the US, and I'd be extremely shortsighted to think our problems were limited to music. It's a perfect demonstration of what happens when lobbyists make the rules: allowed to run rampant over the legal and legislative system, even *their* interests will often suffer.

    Internet radio would likely be far more widespread than it is now were it not for the past few years of uncertainty. And now it's likely to get worse.

    I think the entire system in the US has let the actual musicians down.

  • bliss

    Bureaucracy. Most bills that make it to the floors of Congress are not even vetted page for page. I think that Congress worked better when things moved along at a slower pace. Maybe it's a dream (especially when you're talking about a bureaucracy) but there was time when information flowed at a slower pace and decisions seemed to be made more deliberately. Now NOTHING seems to get done that has universal benefit. However, quick decisions are seemingly made to finance wars. And one has to have been living under a rock not to notice that corporate interests, at least just as much as political interests, drive decisions to go to war. Anyway, the CRB acts as an authority at the tone set by the current presidential administration. That's how hierarchy works, and I really don't mean to sound pedantic. I cannot recall any major decisions that have been made by the current administration over the past 6 1/2 years that have reflected careful moderation and a balance of interests. I'd love to be reminded of one.

    I think that we as a people have let ourselves down. In the beginning of this country we were free men and women who were each sovereign, and we fought and labored so that all men and women would be recognized as such. Now, though, everybody has a mortgage. No person who is in debt is free. That about sums it up.

  • James

    Also, Peter, I think that music licensing as a subject is so byzantine, you have to spend some time trying to understand it – meaning that it is easy to obfuscate. It doesn't help, of course, that in the US you have ASCAP, BMI, SESAC, Harry Fox… and then still you might not get all the rights you need. But then try operating a business in the EU where each territory needs another licence for the musical works. At least you have the semblance of competition between rights societies.

    But you're right, of course, the people making music deserve to be paid. The problem is that the internet is so new no-one really understands it yet — and the people making the laws and the decisions least of all. There is a frightening tendency in the music industry, so burned by P2P, to automatically see the internet as "bad" even when the net is driving their sales these days.

    Finally, even when the laws do change, they take so long to pass that by the time they take effect everything has changed… and so the battle begins again.

  • velocipede

    I actually talked to someone from SoundExchange a couple of weeks ago. I was told more or less the same thing that Last.Fm said. If independent labels and artists want to make it cheaper or even free to have their music webcast, then they can negotiate their own agreements, set their own rates or even give it away explicitly. SoundExchange can even help with this.

    My interpretation of this, and it may not be correct, is that in the long run, raised royalties will mostly only effect the big label releases that want more money from it. Therefore, a side-effect is that small labels and independent artists could get relatively more exposure through Internet broadcasting as the radio stations reduce the amount of relatively expensive content.

    By the way, terrestrial radio is supposed to pay royalties. I was at a meeting the other day and several local musicians were angry that they were not getting any money even though their music was being played on local stations (Hawaii). Even bars and restaurants are supposed to pay. Poor reporting by the stations and/or failure to register their copyright with ASCAP or another agency seems to be a problem.

    As for congress, I guess they have more pressing issues to deal with. . .

  • James

    Velocipede, I think that radio has to pay royalties for the musical work, but not for the sound recording… at least that was my understanding. Net radio has to pay for both.

  • James

    And ASCAP collects for musical works not for sound recordings.

  • Sinjin

    I could be wrong, but isn't a potential and unintentional side effect of this that net radio stations choose to stay on the air but do so by playing the music of artists that exist significantly deeper in the Independent forest than who they play now? If you as a station owner have that burning desire in your soul to share music that you love with others (and possibly gain some sort of fame for yourself in the process) and you are denied access to the majority of people with deals and labels, chances are pretty good that you are not going to fold up shop but instead pursue REALLY underground artists who wont/can't charge the hell out of you for broadcasting their music.

    Rather than the death of net radio, this might instead be the birth of the REALLY indie scene.

  • http://www.createdigitalmusic.com Peter Kirn

    @velocipede/James: James is correct. The issue is that we have these two sets of royalties, one for sound recordings, and another for "performance", which already get confusing when it comes to radio, long before the Internet came along.

    I do spend some time trying to understand the byzantine licensing rules; the real problem is now we're rapidly getting into uncharted waters and no one knows *exactly* what will happen next, especially once we broach the issue of who will actually be the subject of enforcement, or how stations will respond.

    But I think there are reasons to be concerned about the emerging situation, and to think that maybe this *isn't* a big boon for the indies. The thing is, a lot of artists are on some kind of label or another, and it may not be economical for stations to license their work. It's not the artists choosing what to charge; that's the whole problem.

    And the idea of survival being contingent on back-room deals with the major is even scarier. That means that we'll wind up with a world where the Internet side is dominated by a few sites with the power to negotiate (hello, CBS-owned Last.fm) and the labels being licensed are likewise dominated by the ones with big pockets. Already, we're seeing a shift toward musical content being the result of promotional fees.

    Just this week: Warner signs a deal with imeem. Recently: Sony BMG signs with Last.fm.

    What happens to independent sites? What happens to independent webcasters? What happens to the labels not owned by the big parents to sign these deals? Why does a lot of this seem to involve preferential treatment of promoted bands? I'm all for labels paying for promotion, but if you shut down the other outlets, then we're actually talking about organizing around … what, institutionalized payola?

    I don't know that it's too late to stop a slide down that path. But it makes it harder to get excited about individual deals being the norm.

  • http://genjisiraisi.com Genji, pushtobreak

    I guess I’ll chime in with my 2cents here (no pun intended). I don’t understand why there should be one rate across the board as you mentioned earlier Peter. There never really has been as far as I can tell in other areas. Network TV pays different from local TV, and cable and satellite are also at different rates in the royalties world. I think there should be different rates for small internet radio as opposed to those owned by large companies. I also don’t see why any record company would not want to negotiate a fare rate based on the company’s size to ensure maximum exposure and create revenue where there otherwise would be none. It really makes perfect sense. Historically ASCAP and BMI have done just that with things like closed circuit in store radio. One blanket fee covers use of any artist they represent. The play lists are submitted and the money is distributed accordingly. In any case, do we really need all internet radio to have access to Top 40 tunes?

    Sound Exchange is in the process of trying to get artist performance royalties from terrestrial radio too. As an artist I think that’s fair.

    One reason why the laws are so slow in being enacted is that there has not really been a clear answer that works for everyone. As I said before I believe the artist should have the right and ability to opt out of any use that they don’t want to be a part of. This has not really been taken into account. Clearly this would still need some kind of agreement between the broadcaster and the artist or someone who is representing them (e.g. ASCAP, BMI, SoundExchange). Anyone can offer their work under Creative Commons, as many do. When an artist signs with a record company they may give away all or part of their rights to the music and most always give up the ownership of the actual recording. Thus it is the record company’s right to allow or not allow it to be used however they see fit. They can decide “this artist needs exposure let’s give it away” or “this band is so hot people will buy it” They may be right or wrong but, it is unarguably their right. They are after all in the business of making money from music. In every area of the music business the pay for music services has either stagnated or even dropped for musicians. Maybe if our government had better funding for the arts like some other countries this wouldn’t be so bad but, as it is, the current and future state of the professional music world is suffering from this devaluation of creative works.

    The way I see it there is just so much incredibly boring litigation and legal nonsense to all this that the only people who really have the patience for it are lawyers politicians, lobbyist and businessmen. You cannot legalize revolution! Go ahead, mash up, remix, burn copies…long live pirate radio! Most great things come from bucking the status quo. It’s not usually the pioneers who get rich doing it but, it is a necessary part of our evolution. There are things we must do within the system to survive but for any meaningful change we must take risks.

    The entire issue here is control. If anyone could really control the use of music on the internet, or peoples computers for that matter, this wouldn’t even be an issue. Clearly the P2P issue showed that it is still not practical, possible, or productive to prosecute individuals for this even if what they are doing is against the law. Does this mean the law should be changed? Does someone’s inability to stop someone from stealing from them mean it should be made legal? I don’t think it is necessarily right for laws to be changed solely because they cannot be enforced and I believe that is the general underlying faulty reasoning and atmosphere that surrounds this topic. Clearly I don’t have one simple answer for this either. It is a complex issue, which will require long and detailed dissection. I hope someone has the patience to get it right. I have heard arguments from both sides first hand and my feeling is that the topic is just too polarized. And as you pointed out before Peter, everyone is fighting for a piece but no one is looking out for the musicians. For me this is purely an intellectual subject as I rarely listen to any radio, internet or otherwise, and don’t ever really expect to see more than my crappy $25 dollar a quarter from Sound Exchange!

    One last thought to meditate on. No one ever wants to pay for something they already get for free and just about everyone, except perhaps those who are independently wealthy, wants to get the most they can for what they produce.

  • bliss

    Well, there is treatment and there is cure. It's easier to treat a headache than it is to eliminate why one gets a headache in the first place. Because we are dealing with a bureaucracy were are more likely to get patches for the problems we face, rather than complete, new and revolutionary solutions. There's a great deal of legacy code which would provide a fantastic foundation for which to design a new OS, but there is also a lot of legacy code that needs to be discarded in favor of simplicity, transparency, and efficiency. We need a Government of the United States of America OS X, or something like that.

    Right now, yet again, it's the old suits versus change that they don't want to happen. So they are doing what they always do when faced with unpleasant circumstances. They are using their financial clout to patch the decrepit, barely relevant, and barely functional old system. They are doing this with the hope that the patch will stifle change and protect their interests long enough so that they might figure out a way to take control of everything again. The old suits know that a bureaucracy benefits them, and that is why their support of it is lavish and aggressive.

    Again, mortgages, car loans, student loans, clothes on backs and shoes on feet that are not paid for — most folks are in debt. So most people are not in a good position to argue, because primarily many of them would be arguing with the agencies that are paying their bills. This is why most folks continue to support a bureaucracy. If they can live with a bureaucracy at work, then they can live with a bureaucracy that they only have to deal with for a minute and a half on the ten o'clock evening news. Many folks do not like the policies that are in place at their jobs, and most do nothing about it because they have bills to pay. They learn to live with that which they do not want to live with. Those that do become whitsle-blowers face increasing odds that their concerns may not even be legitimate to begin with, never mind their actions bringing about needed change. So most folks tow the line because, to start, they don't even know how their miserable working situation came to be legally permissible. But the lobbyists know first hand how it all came to be, and lobbyists have bills to pay, too. Ever see the movie Thank You For Smoking?

    And all we want is for Internet radio and listener supported Internet radio to remain in business for the benefit of everyone involved. We're not talking universal healthcare, or ending world poverty, or mandatory four weeks paid vacation per year per worker. All we want is to be able to continue listening to the music that we want to listen to over the Internet. And look how messy a simple problem with an available simple solution has become. We're asking for a pacifier and we're being offered a kick in the ass. And, barring a real miracle, we're going to get that kick in the ass come Monday. We're going to get that kick in the ass because we have become quite used to doing as we're told.

    Can you blame corporations for taking advantage of legal and political maneuvering with our government that we, the people, have allowed to persist? Corporations have bills to pay, too. We, the people, have been blinded with finance, so to speak. Okay, that wasn't very good, but you get the picture.

  • Moonbase Alpha

    "All your content are ours!"

    By focusing on the price I think the bigger issue is being overlooked, which is that SoundExchange has, via its unholy influence on lawmakers, appointed itself caretaker of all streaming content royalties, not just those owed to the majors.

    Who cares how much the majors want to charge? If they price themselves out of the market, so much the better. However, this new legislation is anti-competitive because it squashes the little guys who never assigned their rights to SoundExchange in the first place. It seems obvious that independents and unsigned artists will never see a cent from these grand larcenists of the music industry. The U.S. opposes taxing the internet? Yeah, right…

    Unsigned artists who wish to retain the freedom to stream their own content for promotional purposes should band together. I propose Artists Rejecting SoundExchange (ARSE) under a charter which declares that all members retain the rights to exploit their own compositions and recordings as they see fit, and to continue to stream such content on the internet in defiance of "the man".

  • velocipede

    Not ARSE as proposed by Moonbase Alpha, but a polka organization has created an "opt-out" list for streaming performance royalties. SoundExchange was cooperative, but the author suggests that SE ought to set up its own opt out system.

    http://blog.wired.com/music/2007/07/polka-players

    By the way, does anyone read these old comments?