Policy, intellectual property, and changing business models remain hot threads to follow on this site as we watch the transformation of music distribution in the electronic age. This time, we welcome a new contributor to look inside the issues. Surprise: one radio host sides with the record industry, and the issues may not be as clear as you think. Jo explains. –Ed.

Imagine this:  A track from your new record is being played out on the radio — nonstop. All the major indie stations in Los Angeles, New York, Chicago, Miami and Atlanta have picked it up. At this point, I’m sure you’ve already ordered a fancy synth that you plan to pay for with your big check. But there is a problem: You did an acoustic version of Jimmy Edgar’s “My Beats.” So who gets paid? Jimmy Edgar. Guess who does not get paid? You!

The Performance Rights Act is a bill before the US Congress that would require terrestrial radio stations to pay royalties to the performer of a track. It is being supported by artists like Billy Corgan (who recently testified on behalf of the artists’ rights group, the musicFIRST coalition) Don Henley, Jay-Z, Billy Idol, as well as the Recording Industry Association of America (RIAA). Aside from the issue of “fairness,” the United States is one of the few countries that does not require payment to the performing artist when her track is played on the radio.

Celia Hirschman, host of “On the Beat” on Los Angeles’ KCRW public radio, a broadcast on changes and trends in the music business, says she agrees with the act. (Celia notes these are her personal views, and do not necessarily reflect the position of KCRW.)

“For decades, the laws have favored a free license to play artists’ music on radio,” says Hirschman. “This was ratified by Congress and basically accepted by all concerned…This free pass no longer makes any sense, especially for commercial radio. A reasonable compulsory license fee for all radio, with lower rates to non-commercial is an equitable solution for artists and labels.  Commercial radio stations earn their income by selling advertising because of their programming content.  It’s only fair that the content providers are compensated.”

“This free pass no longer makes any sense.”

Celia Hirschman, host of “On the Beat” on KCRW

Opposing the bill is the National Association of Broadcasters (NAB) who claim the legislation amounts to a “tax” and will force many radio stations to go bankrupt. Additionally, opponents of the bill point out that many artists were first discovered because of radio exposure, which translates into sales (ticket sales, album sales and merchandise) and promotion of their brand. If the station goes under, so does the performing artists’ potential income.

Dennis Wharton, EVP of NAB, claims that the RIAA “relies on cherry-picking international examples that paint a distorted picture of copyright law.” “The US protects sound recordings for 45 years longer than Canada and many countries in Europe, says Wharton. “If it’s “international parity” that RIAA is looking for, they ought to examine the entire landscape.”

In fact, the international landscape is not equal.  Many countries in Europe run stations owned or subsidized by government funding. The foundation of our copyright laws are different as well. In the United States, we use the term “copyright” whereas many European countries use a term equivalent to “author’s rights.” “Copyright” reflects an attitude that is concerned with the restriction of uses for economic reasons, whereas the term “author’s rights” reflects an attitude that is concerned with the extension of the author’s intellect and self.

I recently spoke with Brian Lee Corber, an IP attorney who has closely followed the Performance Rights Act. In his opinion the bill will not pass. “Collecting royalties for the songwriter is already inaccurate; it’s based off of surveys. Logistically, collecting royalties for the performer is even more complicated…what happens when the performer is an orchestra?” Corber feels this logistical nightmare may make it difficult for the legislature to justify passing this bill.

As a reaction to the Performance Rights Act, NAB is backing the Local Radio Freedom Act which calls for no tax or fee for the performance of a sound recording on the radio. As of March 24th, 9 more lawmakers signed onto the Local Radio Freedom Act, making the total number of co-sponsors 158.

For More Information:

Music First Coalition: www.musicfirstcoalition.org

National Association of Broadcasters: www.nab.org

KCRW: www.kcrw.com/etc/programs/ob

Sources:

Dougherty, F. Jay. Copyright Law Class at Loyola Law School, March 24, 2009.

“Mr. Corgan goes to Washington for a Bigger Piece of the Radio Pie”

http://blogs.suntimes.com/derogatis/2009/03/updated_mr_corgan_goes_to_wash.html

“NAB disputes RIAA Claim Ahead of Performance Rights Hearing”

http://radioink.com/Article.asp?id=1206143

“NAB, musicFIRST go Head-to-Head on Royalties”

http://www.fmqb.com/Article.asp?id=1235167

“Smashing Pumpkins Singer, Billy Corgan Testifies Before Congress”

http://www.opposingviews.com/articles/news-smashing-pumpkins-singer-billy-corgan-testifies-before-congress

Los Angeles-based CDM contributor Jo Ardalan is the Managing Director and Founder of Fixed Noise, a community-based company specializing in audio software development, artist management and business development in tech and entertainment.

She’s a veteran of Waxploitation and Native Instruments, an experienced sound designer and engineer, and consultant.

And she has a Reaktor tattoo.

Could meshes of data help the creation of new, international radio broadcasting and receiving mechanisms – even in rural areas? Artist Juan Esteban Rios proposes a design to do that. It’s not just a software concept; a hardware design would make the idea accessible even to people who don’t own or know how to use computers.

It seems a powerful idea for musicians, as well, particularly if it helped eliminate the need for dedicated streaming servers. (There may be others who are more familiar with P2P broadcasting technology out there; if so, I’d love to hear from you.) Imagine tuning into a gamelan performance in Jakarta, then a live electronic music evening from Brazil, then a performance in rural sub-Saharan African (relayed to better infrastructure in Lagos).

The technology here is radio-based (see clarification from the creator of the video in comments), but mesh and P2P technologies involving the Internet — or a bridge from remote, radio- or satellite-based communication — could likewise apply.

Video feature by designguide.tv, found via toxi.

As music listening takes new forms, that builds new business models. But who calls the shots? Who gets to play, and who reaps the benefits? One immediate danger is that major label deals will dominate as outlets vie for position. Online outlets like MySpace have started to look a bit like the same-old, same-old world of major labels and big deals. “Indie” music sometimes makes an appearance, but nearly always in the form of signed artists and often in the shadow of the majors. Unsigned artists can get onboard, but the playing field often isn’t level – and while majors negotiate lucrative deals for their music, unsigned artists and indies have to give theirs away for free. At the other end of the spectrum, unsigned artists often don’t get paid by services that benefit from their work (like MySpace).

That’s why Last.fm’s announcement yesterday was a potential bombshell. Now fully available after months of development, the Artist Royalty Program will pay artists royalties on plays directly – no label required. Unsigned and independent artists can sign up to earn royalties from on-demand plays and Last.fm’s streaming radio.

Last.fm Artist Royalty Program (last.fm/uploadmusic)

Royalties 101

To fully understand what that means, let’s back up and talk about where royalties come from in on-demand online music. This is entirely separate from downloadable music – that’s pretty straightforward. If you, for instance, sell a track on your band’s website for 50 cents, people pay 50 cents, own the track, and you get 50 cents. If you sell it through another vendor, then you get a slice of the sales pie.

But on-demand, streaming music, via radio stations or elsewhere, works differently. Since the days of radio, broadcasters have wanted broader access to music. Obviously, if they had to negotiate rights individually for each track, they couldn’t exist. So the solution has always been a system of blanket royalties. In the online space, there are two kinds of royalties, coming from two different licenses. Here’s the simplified version (lawyers, feel free to clarify):

1. A license for the recording – the “statutory license.” These fees are set by the Copyright Royalty Board and collected by SoundExchange. It’s called “statutory” because webcasters don’t need your explicit permission to broadcast music. They’re paid to the owner of the recording. If you’re a signed artist, that’s your label.

2. A license for the “performance rights” of the copyrighted work itself. These fees are negotiated with performing rights organizations like ASCAP, BMI, and SESAC.

That sounds odd (Last.fm isn’t “performing”), but it makes more sense if you think about the actual music. There’s the recording of the music, and the “work” itself. So, for instance, you might record a cover of a song. There’s the songwriter, and the artist recording the work; they may not be the same person.

If you’ve written and recorded your own song, you own both of these rights. You might sign with a label and give them the recording rights, but either way, the basis remains the ownership of the recording and the musical work.

So where does ARP fit in?

First, regardless of whether you’re part of ARP or not, you’ll always receive the performing rights if you’re the writer of your musical material. That’s why it makes sense to join an organization like ASCAP if you’ve ever produced anything; unless you do nothing but cover other people’s music, they’re there for you. They’re not the RIAA – they represent writers and publishers. In fact, even if you release your music under a Creative Commons non-commercial license, you are eligible to receive royalty payments collected by these bodies. (That’s the topic of an upcoming article.) If you join ARP, you’ll continue to receive income for this music.

What ARP does is to provide additional income for unsigned artists. A spokesperson for CBS Interactive (parent of Last.fm) tells CDM:

If you participate in the ARP, you should not be signed up with a recording rights society. In effect, Last.fm is cutting out the middle man here by paying the artist directly without going via the collection society. Writers benefit from the publishing rights royalties that Last.fm pays to the publishing rights societies. ARP is for recording rights only.

Who Benefits from ARP?

Here’s where ARP makes a difference. Previously, the system for the artist was to go get a label, and then get that label to collect royalties on the recording. The label, in turn, had to go to SoundExchange, formerly part of the RIAA but now an independent organization, to get the money. Result: fees get set by a board of judges chosen by the Copyright Office (the Copyright Royalty Board), and you’ve got multiple middle … men, actually.

Under the ARP, you go to Last.fm, and Last.fm pays you. You upload the music where you want it to go. And, via Last.fm’s community pages, you actually have some tools for your music:

Last.fm for labels and artists

In addition to royalties, that includes stats, event management, and the ability to connect with fans. And the other thing that’s interesting about this whole system is that both parties essentially have to be happy. Artists have to be getting value from Last.fm’s service, and royalties that make sense for them. Last.fm can then, in turn, build an ad-based revenue model that works for them as a business. That’s a far cry from a giant battle between the recording industry and large performers’ organizations in front of a group of judges. It’s new, so we’ll have to see how it works, but it’s nothing if not appealing.

(See also a similar announcement from imeem, though that one required working through SNOCAP for distribution, and comes from, arguably, a less popular service. I also think some of Last.fm’s unique tools for data collection and fan management make it more interesting than imeem. But this is all the more significant if other sites do the same thing in the future.)

ARP for Labels, Getting Paid

The ARP system isn’t limited to artists, either. New labels could embrace the system. Again, a Last.fm spokesperson clarified for CDM:

A label can participate in the ARP Program IF they own the WORLDWIDE rights to the content and have NOT signed up with any collection societies.  (Basically only startup labels that aren’t collecting any royalties would be interested in participating in the program since they’d only receive revenue from Last.fm in that case)

One other simple upshot of all of this is that people actually get paid. That’s not the case with MySpace. As Eliot Van Buskirk writes for Wired’s Listening Post:

We’ve had a bone to pick with MySpace about this for a while, because it plans to compensate major labels with a share of ad revenue without similarly compensating indie labels, unsigned artists, or possibly even the artists signed to them.

The headline says it all:

Last.fm Compensates Artists, Unlike Some People We Know [Wired.com Listening Post]

It’s well worth the full read. Eliot notes that even Last.fm doesn’t maintain the amount of money will be huge, partly because online streaming is still growing gradually (though I think listening habits will continue to grow). The money is coming from ads that appear with the streams. But Wired notes over 450,000 tracks are available on Last.fm as part of the Artist Royalty Program. And they also observe that, unlike MySpace, indie artists aren’t left in the dark, and unlike almost everyone, payouts are transparent – you can actually monitor what you’re earning.

Ultimately, I think that’s the bottom line: Last.fm is actually paying people. And I don’t mean to make an argument against labels. On the contrary, ARP is a tool many artists will likely use while looking for a label – alongside other useful tools (some arguably more valuable than direct revenue) provided by the service. The one question I do have, though, is whether new upstart labels might forgo the complex recording collection process entirely and start to use services like this directly. That would allow them to continue to fill the business and promotion roles labels have always provided, which artists and writers often can’t handle on their own. But it could be the first glimpse of a new set of models in which music creators, publishers, and labels deal with online business directly, rather than dealing with a middle man.

Update: Labels not so happy

I missed this: Merlin, one of the aforementioned rights bodies representing the labels (12,000 independent labels total, controlling more music than EMI) has protested the ARP license:

Merlin Opposes Last.fm’s Artist Royalty Program [Wired.com Listening Post]

The grounds: no retroactive license fees, a breakdown in negotiations with Merlin, and vague licensing terms. Now, I’m not sure on any of those points – in particular, Merlin’s negotiations should theoretically be independent of ARP to begin with; it explicitly excluded people who have signed with labels who are part of separate negotiations. If you’re an independent artist, it doesn’t really matter what Merlin thinks or even what they deem “illegal” – particularly if you’re uploading and licensing your own music, which is presumed by the ARP deal.

But the main thrust of this argument is that past Last.fm plays were illegal and unlicensed.

Last.fm’s response is, basically, ARP is about indie artists, not Merlin. Merlin’s banner says “representing the rights of independent record labels worldwide,” by which they mean, of course, their members, not necessarily anyone else.

But Does it Add Up to Anything?

The big problem is, streaming rates in general are a tiny fraction of a cent per play. If Last.fm achieves greater volume, that could be good news for artists. Until, then, though, this is largely symbolic. Further discussion:

Fine Print: What Do Royalty Rates Actually Pay?

First things first- you could just buy a blank one, but where’s the fun in that?

The CDM staff wanted a mic flag for use at the upcoming NAMM show, and I couldn’t say no to a MAKE-type challenge. Liz McLean-Knight clued me in to this instructional Youtube video:

I found the video to be a bit overly complicated, but it gives you the general idea. You need a small box with a hole through the top and bottom, and you pack the interior with foam to hold the mic snugly. No sweat (theoretically).

I’ve had this little metal project box hanging around for a long time, and it was the perfect shape. A bit of measuring, guessing, and heavy Dremel action gave me a nice mic-sized (if irregular) hole through the center. After a quick consultation with Peter, the decision was made to emulate the feel of this vintage NBC flag. (NBC logo photo from vintagemicflags.com, which has lots of other mic flag images.)

Two coats of black paint later, I was ready to affix the CDM logos. A little bit of paint touch-up, making sure the foam is perforated to allow the mic tight passage, and ta-da! My Superscope condenser is a little slim for the flag, but Peter’s Shure Beta 87C should fit like a glove.

All we need now is a big, foamy windscreen for those hard-hitting reports…

If you’re curious to hear the results of the H4 in action, Brad’s story was on NPR’s Morning Edition yesterday. (More on the coworking story at Brad’s blog.) I make a brief cameo, and provide a fair bit of the ambient sound at the beginning, which I find amusing. But whether or not it’s the best choice for you, the H4 can certainly be used in pro applications.

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