Much of the debate online about the record industry has devolved – with quite a lot of help from the misguided message of the US trade group, the RIAA – into a debate about piracy. It winds up being something dumb, like, “Piracy is evil!” “No, piracy is great!” Wow, this should be a really insightful discussion – I can’t wait!

Piracy is, pure and simple, “loss prevention.” People often laugh off the comparison between piracy and things like shoplifting. But I think that comparison isn’t made enough – because if it were made, and made fairly, the record industry might remember what it’s business actually is. It’s business is selling something. If that becomes secondary to preventing theft, they cease to be a real business. Whether you’re scared of piracy or think it’s harmless, you ought to be able to agree. This ignorance is a disease that has threatened at times to infect music software creators, too – and I think the same issues apply.

The counter-argument even from some RIAA critics is that record sales don’t matter to musicians, or that sales of recordings is doomed. Those are interesting arguments. They just don’t have actual facts to back them up. With musicians selling music direct and working out new means of distribution with labels, the former is silly. Sure, not all musicians rely on music sales – some of us rely on things like teaching guitar lessons or (ahem) writing about music technology. But many other artists do think about selling music. Digital tech means that for bands like Sound Tribe Sector 9, they can even tie this to lucrative live performance. (STS9 now earns lots of revenue by selling downloads of live performances to concertgoers. I’m sure others could follow; I just happen to talk to the STS9 guys and know this.)  And most importantly, with explosive growth in mobile music, online music downloads, streaming music, Internet radio, terrestrial digital radio, music communities, the recording as a business is here to stay, whether you like it or not.

Not that you’d know any of this listening to the RIAA, because the only issue they want to talk about is piracy – not the actual sales one would associate with an “industry.” So why is no one calling foul – not only because the RIAA pursues abusive legal intimidation, but because they seem unable to act in their own self interest as an industry? Isn’t that a little … odd?

The problem is, music recording is often treated differently from other businesses; we view it in a vacuum, without precedent or comparison.

Have a quick look at the RIAA’s website:

http://riaa.org/

Today, on December 16, 2008, the top headline is about an anti-piracy bill. The top blurb is about parents and teachers on digital downloading. Then we have some sales statistics, news on anti-piracy items, a whole section on piracy identification, piracy and parents, some links in the nav bar on piracy … you get the message. In fact, the only thing that would tell you that this is the Recording Industry Association of America and not the Association of Intellectual Property Lobbyists and Lawyers is some proud stats on “gold and platinum records.”

So, the only thing that would make me want to go into the record business is info on their top-selling records. Except, of course, that’s equally ironic and backwards-looking. We know that generally the new world market for music is less interested in explosive singles – there’s more selection, more variety in genres, more different kinds of people listening. The RIAA’s homepage is currently celebrating “50 Years of Gold Records.” That looks back to an era when American music tastes didn’t cross over between white and black artists. Some of those albums were wonderful, but with deep racial divides and uniform tastes, it was hardly a golden age. In 2008, the US has elected an African-American President who listens to music on his iPod. But never mind business growth and business potential: that wouldn’t fit into the RIAA’s victimization of itself. If the RIAA can portray itself as a failing industry, they have extra ammunition in what seems to be their one and only priority: fighting online piracy. If actual sales go down the tubes in the process, so be it. (In fairness, sometimes the RIAA does seem to be seriously deluded in their arbitrary nostalgia. Exhibit A: The CD: A Better Value Than Ever is one of their key statistics papers. Where’s “Online: A Massive New Market”?)

To see just how absurd this is, let’s compare another industry that’s having tough times – the National Retail Federation. They’re certainly in an unenviable place, with consumer confidence in the US at historic lows. And retailers get hit hard by theft – harder, you might argue, than the music industry. If you own a store, you get hit by shoplifting; it’s a fact of life. That’s real, material goods walking out the door, goods the retailer can’t replace, in an industry known for its razor-thin margins. Look at retail theft, and you might be glad to be in the record industry, selling online goods that won’t be irrevocably damaged by digital theft and that can have substantial profit margins and loyal, passionate fans. Oh, by the way: music has been historically more recession-proof than a lot of segments of retail.

If the NRF behaved like the RIAA, we’d see nothing but anti-shoplifting info. We’d see educational flyers warning parents about the dangers of their kids stealing candy bars, extensive statistics on loss, new lobbying for tough, one-strike-you’re-out prison sentences, and so on. Of course, that isn’t the priority of the site. The NRF lobbies, too, but on a range of issues. They cover “loss prevention” – they’d be nuts not to – but among other issues, like merchandising, logistics, finance, information technology, marketing. They have events that work on everything from supply chain to credit. Gee, it’s almost like they’re running a real industry. I’m not saying I agree with the positions of retailers. I’m saying they seem to be acting in their own self-interest, which is something you can usually take for granted with a business.

Focusing entirely on loss prevention is something retailers have sometimes done, with disastrous consequences. Tell your staff to stop shoplifting and forget to tell them to concentrate on helping customers buy stuff, and watch what happens. Lock your merchandise behind glass cases and watch what happens. You’ll wind up with safe merchandise: safe, unsold merchandise. The lessons of digital music and DRM clearly point to the same phenomenon.

You can apply the same communications test to other businesses. The American Wind Energy Association, for instance, talks about what’s great about wind energy. They talk about jobs and societal benefits. They lobby, too, to keep wind a priority. Now, wind energy has nothing to do with music, but that’s precisely the point, too. Why can’t you substitute the word “music” in the above sentences? Regardless of the nature of the business, this is what a business trade group ought to be doing.

In fact, even other music advocacy groups seem to get it when the RIAA doesn’t. Performing rights groups BMI and ASCAP have certainly lobbied against piracy, but it hasn’t stopped them from doing anything else. Check out the ASCAP and BMI websites and you’ll see musicians, seminars on music business, actual music. What a novel concept.

There’s a lot of damage to undo, and it has nothing to do with the debate on piracy. Check out reader comments here, blog entries around the Web, and popular press outlets. The narrative about music: music purchasing is dead. Music online has no value. The music industry is on the verge of collapse.

Guess where these narratives came from? You’ve got it: direct from the RIAA. People passed over the scare tactics the RIAA tried to peddle on piracy, and bought into their scare tactics on the industry as a whole. The RIAA has done massive, long-term damage to the image of music as a business. They’ve devalued the work that we as musicians do. They’ve squandered massive business opportunities online, and made an uphill battle for the people trying to take advantage of those opportunities independently.

I respect people who want culture to be free and shared. Music as a business should never be the only view of music, because it’s a cultural activity, with deep, personal, emotional value that can never be quantified. But for the same reason, I value any discussion that helps protect a business that promotes that cultural activity. We live in a world with grocery bills; in the US, we pay for health insurance. Damaging the business is dangerous to musical activity, period. The RIAA and its members are certainly entitled to have opinions about policy and law as they relate to piracy. But when those groups focus on those issues in the exclusion of all else, they do damage to the industry as a whole – including musicians who have nothing to do with them or their member labels. So it’s time to really start focusing on these other, challenging issues. Each time someone says that business is doomed, even if they’re doing so in the context of being critical of the RIAA, they’re unknowingly let the RIAA set the agenda for discussion. And I think it’s long past time for a more productive agenda.

I look forward to the RIAA’s one valuable commodity: its yearly sales figures. They’ve shown massive growth in downloaded and streamed digital formats that suggest that all of this is simply a transition from one format to another. (Furthering that argument, they even show growth in odd places, like vinyl records last year!) It’s purely a business issue. But it’s about time “industry” and “business” got mentioned together again. Stay tuned.

Discuss. (I’ve said enough.)

What happens when people targeted by record industry legal intimidation fight back? What if they not only defend themselves, but go on the offensive, counterclaiming the industry is abusing the law and legal process? What if courts decide the industry really can’t hijack an unrelated PC belonging to someone’s Mom and Dad? That’s what’s at stake in a case in Rhode Island.

Now, the exciting conclusion to the face-off between record industry lawyers and a class full of Harvard Law students and their professor. Well – sort of. This is legal drama we’re talking, so it may be neither exciting nor conclusive.

Our Story So Far

The case was this: as part of ongoing threats of litigation, Rhode Island residents Arthur and Judie Tenenbaum faced legal pressure from the US record industry group, the RIAA, on behalf of their son, Joel, a grad student at Boston University. Joel is accused of sharing music files online. 7 songs allegedly shared translates to $1 million in damages, according to the industry’s arithmetic, but it may not be the damages that are really what’s in question.

Here’s where things get a little weird. The hearing yesterday in Rhode Island federal court addressed a motion by the record industry to force Joel’s parents to produce their home computer, so that the computer could be inspected for evidence of illegal file sharing.  That would have made no sense, given that Joel is off at grad school, Arthur and Judie didn’t own the computer when Joel lived with them, and even the RIAA isn’t alleging that piracy took place on the computer. (You could place his uncle under house arrest and seize his parakeet as a witness, too, if you’re going to get that tangential to the case at hand.)

The hearing yesterday was rescheduled to January 6, however, because the Tenenbaum’s lead counsel – Professor Charles Nesson from Harvard Law School – was not admitted to argue in a Rhode Island court. (There’s a legal question there; I don’t think it’s just that they hate the Red Sox.)

The industry responded with a motion to prohibit any use of the parents’ computer until January 6. (Yes, Merry Christmas to you, too, RIAA.) I’m not sure what that would have accomplished, but the judge denied their request.

So, bottom line: the Tenenbaums get to hang onto their computer until January 6, and we find out what happens later.

You can expect a good fight, however. The Harvard team aren’t just defending Joel: they have a counterclaim. The basic argument: the RIAA isn’t really recovering compensation. The goal, says the countersuit, is simply to make young people, parents, and schools afraid of computer use. They are looking for damages from the RIAA, claiming that, as a criminal statute, the “Digital Theft Deterrence Act of 1999” the RIAA is using as its weapon deserves a trial by jury – and in the meantime, the RIAA has abused the law and the civil process of the courts.

Coverage

Some reading on the story from elsewhere:

Legal Jujitsu in a File-Sharing Copyright Case [NY Times]

Billion Dollar Charlie vs. the RIAA [Boston Globe]

RIAA Vs. Web 2.0? Social Media and Litigation [Slashdot, on the use of social media to combat the RIAA]

Boston Illegal: Will the RIAA finally get what it deserves? [Robert Cringley editorial for InfoWorld]

Judge postpones hearing in key RIAA lawsuit [CNET News]

And for an extra oddity:

RIAA May Be Violating a Court Order In California [Slashdot]

What This is About

Before we get another heated discussion going, let’s consider what this case is really about. Forget for a second the record industry’s business, the real issues around piracy and the value of music online. Ultimately, this is simply the case of an industry group that has been allowed to run wild, using legal intimidation and excessive, heavy-headed techniques. Going after Mom and Dad’s unrelated PC is clearly an unnecessary invasion of privacy.

The problem is, the strategy only works until someone protests. The assumption is that applying ample legal pressure gets more would-be defendants to settle out of court, saving a real legal test and helping the RIAA demonstrate that it’s doing something. Critics have said just that for years, but this could be a high-profile repudiation of these techniques if the Harvard team can move forward.

And as for the larger issues about the industry and its business, well, what about that? The RIAA’s response to criticism, even from members and music content owners, has been that the ends justify the means. But what, exactly, is the group accomplishing on behalf of their member businesses? Is their case really so weak that they have to resort to intimidation?

Many musicians are indeed opposed to piracy – and also believe the value of music, and the relationship listeners can have with artists and labels, can protect music as a business. Music creators are aware how much income comes from relationships – from freelance work, from t-shirt sales, from teaching, from live shows, and the many ways artists and creators support themselves. The single-minded, obsessive focus on piracy that would drive the RIAA to these tactics in the exclusion of all else seems to come from some alternate dimension.

Of course, this kind of nonsense only short-circuits those discussions. And from a legal perspective, the central question remains: is what the industry doing even appropriate to the law and legal process. We’ll follow this one as it develops.

Music DRM may be a thing of the past, online sales may be growing, but that doesn’t mean the U.S. record industry has missed a beat in its ongoing legal and lobbying campaign against music piracy online.

The latest battle starts today in Rhode Island federal court. The difference this time: the RIAA and record companies will have to face a Harvard Law prof and his students. Prof. Charles Nesson and his team allege the industry is abusing the court system, unfairly making “examples” out of the people they’re suing, and invading privacy.

Whatever your feelings about the righteousness of litigation as a deterrent to piracy, the case in particular gets pretty strange. Rhode Island residents Arthur and Judie Tenenbaum face having their home computer seized as evidence, despite the fact that even the industry legal team doesn’t contend this particular computer was used for the alleged downloading. The couple’s son faces a stunning $1 million+ in possible damages, but only allegedly shared seven songs on Kazaa – and the couple didn’t even own the computer when their son lived with them.

The team will be up for interviews, so I’ll try to follow up – let us know if you have questions for them. More here:

RIAA v. Joel Tenenbaum @ the blog CyberOne: Law in the Court of Public Opinion [Harvard Law]

Updated: Early word is that the hearing has been rescheduled, Prof. Nesson isn’t admitted to argue in a Rhode Island court, and the judge (rightfully) denied the RIAA motion to look at Joel Tenenbaum’s parents’ computer, since it wasn’t involved. More official details forthcoming.

In other news, Jim Griffin of Warner Music Group continues to push a plan to offer a blanket license to campuses to avoid litigation by allowing students to pay a voluntary monthly fee to download music from file sharing services. It’s not entirely clear to me why this scheme continues to attack such ire online. Ars Technica rightfully says hold the kneejerk responses and wait for the details. There’s certainly a precedent: clubs, bars, concert venues, and the like already pay blanket license fees for performance rights, and the revenue is ultimately distributed to the people who own the work (think publishers and writers). That’s not to say the plan isn’t rife with potential problems, and it seems to me could even endanger efforts to encourage things like Creative Commons licensing. But without more details, it’s tough to criticize the idea without taking into account both its pitfalls and potential.

One thing everyone ought to be able to agree on, perhaps even some of the beleaguered record labels: ongoing litigation has been ugly and unproductive, and still doesn’t solve the underlying problem. With broad wireless Internet access on the horizon, even if I were to play devil’s advocate and assume I was an RIAA member wanting to stop campus sharing, it seems just scaring campuses into blocking these services isn’t really a solution.

And as artists, our primary concern ought to be that these responses aren’t doing what we most desperately need: establishing a real business model and promotional possibilities for emerging distribution online.

Song registration requires citing each sample? No problem — unless you’re an overzealous Pd user. Meet Johannes Kreidler and his work “Product Placement”

product placements (2008)

music piece / performance (”music theater”)

70,200 samples in 33 seconds: nightmare for GERMAN RIAA

If you want to register a song at GEMA (RIAA, ASCAP of Germany) you have to fill in a form for each sample you use, even the tiniest bit. On 12 Sept 08, German Avantgarde musician Johannes Kreidler will —as a live performance event—register a short musical work that contains 70,200 quotations with GEMA using 70,200 forms.

Here he is, causing hilarity with a phone operator for GEMA:

And here’s the actual piece, which sounds as awful (in a good, glitchy way) as you’d expect listening to 70,000 records at once might sound.

I’m not entirely sure what this proves, but now you can say you heard it.

And if this doesn’t mean sampling has jumped the shark, nothing does.

Product Placements Piece Page: English | German

As an addendum to the Last.fm story today, what are the actual royalty rates we’re talking here? They’re not much – precisely the reason musicians will have to get broadcast-style play counts to ever see anything worth counting. For instance, Last.fm makes the comparison with the BBC in the Wired story. The BBC has more hegemony than even a giant US ClearChannel radio station, and I suspect it’d be virtually impossible for an unsigned artist to see that number of plays.

How little? Try $0.0005 per play, as Steve of sighup writes in comments. (I think that’s just radio plays; assuming you get both radio and on-demand plays, you should do a little better – but, still, you might be better off with your CD sales out of your guitar case.) Keep in mind, that’s on top of other revenue, like performance royalties from ASCAP, BMI, and such, but it’s still not much.

Low as that may sound, it’s in the same ballpark as traditional webcasting rates. Prior to the big shake-up over Copyright Royalty Board rates here in the US, its rate was US$0.0008. And that’s only in the US, whereas Last.fm is international – and some of that goes to SoundExchange, and some goes to your label, and … you get the picture.

The CRB and record industry did successfully pass higher rates, up to $0.001 (okay, still not putting your kids through college). Those rates caused an uproar from webcasters, but they were also initially associated with punishing minimum fees, which depending on the definition of what a “channel” is could have driven millions of dollars in fees for some webcasters. Those requirements, not the relatively tiny per-song rate, were what concerned artists and writers, because the new rules threatened to take away important channels for getting their music out there and driving sales to more lucrative enterprises like CD and concert sales.

As it happens, that debate continues as we speak. In the June 5 RAINcast (Radio and Internet Newsletter), Paul Maloney points to reports that Pandora’s chief executive is personally lobbying against these rules, because they’d suck up 70% of that services revenue, for a total US$18 million in royalties. You can do the math: that’s enough to bury Pandora, but not enough so that you’d ever see any of the change. Everyone loses. RAIN also notes that SoundExchange hasn’t actually been enforcing its new rates, so we haven’t yet seen what happens to Internet broadcasting with the new rules – even though they were ratified last summer.

So, Last.fm’s rates, while small, go straight to the artist, they’re transparent, and they’re in the ballpark of webcasting fees in the past. Since they’re set by Last.fm, we can assume CBS isn’t destroying its own business, either. And keeping things in perspective, this is really about Last.fm, not the entire universe of music. That’s the good news. The bad news is, they’re so impossibly small that for most people, it won’t really matter. And, yes, if Last.fm’s main business model is advertising, you have to wonder if artists won’t be more successful directly selling ads. Even Google AdSense could wind up being better for the artist, partly because it’s unclear how much ad exposure Last.fm can cram into its service. In the long run, my guess is you’ll see all of these – given the amount of ad inventory out there, and the rising consumption of music, and new ways of consuming music, I don’t think this is a zero sum game.

But the bottom line: cool as the Last.fm announcement is, even I’ll quickly admit that royalty rates in general are unlikely to make or break most artists’ lives. The real business is elsewhere, at least for now. If Last.fm can massively expand the number of listens, though, the whole game could change – and that means even that fraction of a penny could wind up being an important precedent. Stay tuned.

So, record industry, why is it you would want to push for a broken, proprietary, exorbitantly expensive to a problem that doesn’t exist as part of a discussion to which it’s entirely unrelated? The RIAA’s Senior Vice President of Government Relations (otherwise known as Grand Poo-bah of Politician Lobbying) Mitch Glazier was happy to explain to Technology Daily:

“Why wait until it is a big problem to start addressing it? There are available technologies in the marketplace to address this issue.”

Yes, indeed. Why wait for a problem to actually exist before legally mandating a solution? A technology exists! Therefore, you are obligated to use it — regardless of cost, whether it functions on the devices people use, whether better technologies exist, or whether there was even a problem in the first place. Which would you prefer: a record industry that works to solve today’s real problems, or one that creates massive, new problems to solve the problems they imagine might exist in the future?

None of this really seems to justify much of a response, but the Digital Freedom Campaign has taken a deep breath and tried to muster a logical response anyway (I don’t envy them the task):

“The music industry’s top lobbyist is calling for the implementation of a burdensome, costly, and completely unnecessary technology by webcasters who play and promote the artists the RIAA claims to represent. He then admits that the issue is “not a big problem,” said Jennifer Stoltz, a spokesperson for the Digital Freedom Campaign. “For the RIAA to try to impose unrealistic and wholly unnecessary technical mandates on an innovative and vibrant industry as part of larger, unrelated negotiations process is baffling.
“The specific issue at hand is not commercial piracy, but rather fair use of legally recorded music for personal use, which is perfectly legal,” Stoltz continued. “Requiring webcasters to implement mandatory digital rights management technologies to prevent any personal recording of Internet radio streams is an imposition on both webcasters and consumers. It is a costly solution without even a hint of a problem. There is no evidence whatsoever that stream-ripping or commercial piracy from Internet radio is an issue, and the RIAA and SoundExchange should proceed with the ongoing negotiations with webcasters without demanding provisions that would further harm and inconvenience Internet radio listeners.”

Sorry, Jennifer, you lost me in all that logic-y, fact-y stuff, probably because I was so overwhelmed with the sense that you hate music and intellectual property.

Digital Freedom Campaign

Of course, it makes sense that webcasters and the record industry would have different interests, and it’s their prerogative to defend those interests. As readers have noted on this site, navigating the law and finding rate structures that work isn’t a simple task. But that’s all the more reason to focus on issues at hand.

Some have asked if it makes sense to go past the industry altogether. For individual artists, that may be a solution. But with so much music tied up in the current system, that doesn’t really help the webcasters. Attempts to survive on free music historically haven’t gone so well (as MP3.com tried, and failed). Certainly, this doesn’t engender faith in the record industry to achieve sound policy on sound — to say the least.

Act now, fellow musicians — before Sound Recorder destroys music!

It’s amazing how complete and total crazies can suddenly wind up with the backing of organizations powerful enough to dictate the law. Witness the strange story of the “stream-ripping” scare, and how it somehow led to a push for mandatory, proprietary DRM on all Internet radio.

Gasp as the experience of bringing back Mark Twain’s ghost somehow inspires a company you’ve never heard of to build their own DRM for streams!

Recoil in horror at the evil pirating capabilities of Windows Vista and its Sound Recorder, as Microsoft earns billions — billions! — of dollars by encouraging people to steal music from radio streams!

Sigh with satisfaction at the realization that we can put a stop to these unprotected broadcasts of music forever, saving music itself in the process!

What? None of this sounds familiar? Bizarre, absurd, even illogical and out of touch with any recognizable reality, you say? You’re right, but alas …read on.

(See previous: Internet Radio Wins Temporary Delay, Possible Minimum Rate Break. You knew it wasn’t really going to be that easy, right? Apparently some of you missed my sense of irony. I was on vacation, so I wasn’t trying as hard to make my sarcasm apparent.)

Our story begins at the end of April, when a company no one had ever heard of (Media Rights Technologies) suddenly issued a press release claiming Congress had to act now to stop the scourge of “stream ripping” — recording Internet radio streams. The bad news: the idiotic ideas inside have now become negotiating demands from the record industry. Among the peculiar talking points at the time:

1. Apparently choosing to bury the lead, the press release started out with a historical non sequitur about how the company was “the first to create virtual interactive exhibitions like The Private Life of Mark Twain where you could actually see and hear Mark Twain’s 1835 Martin guitar playing Old Susannah for Noah Adams on NPR’s All Things Considered.” Um … good for .. them?
2. Slapped with an equally bizarre lawsuit by the RIAA, the company went on to — blame the RIAA for frivolous cease-and-desist orders? Start a rumble with Mark Twain’s … uh … management and legal team? Nope. They concluded they should blame Microsoft and develop their own, special DRM technologies, because Windows Media Player didn’t have enough DRM on its own. (In fairness, this was an early version of WMP.)
3. Then, the mysterious MRT claims the record industry is losing US$50 billion on the “stream ripping industry.” (The … what now? And the record industry would have been selling nearly a billion CDs that it couldn’t because of this industry?)
4. Finally, the real evil: Microsoft’s Windows Vista is a success because of evil stream-ripping capabilities Why, just look — while the record industry sales were slumping, Vista sales were increasing! That has to be connected!
5. There’s only one solution! Quick! Pay MRT for stream-ripping protection, using their specialized streaming DRM! No, wait — force Congress to force webcasters to use MRT’s DRM!

Yes, you heard that right. The real danger to the music industry: unprotected streaming content in Real, Adobe, Microsoft, and Apple formats (in other words, everything) that must immediately be replaced with MRT’s proprietary solution. Just how real is this danger? Why look no further than an evil piece of software, built for pirating music. It’s called (cue the scary piano music) Windows SOUND RECORDER. Yes, you read that right:

Microsoft has even built into the Vista OS a native ripper, called Sound Recorder, which will deaggregate performance-based streams of unlimited duration and convert them into unprotected WMA downloads, easily uploaded onto Zune players. This year, Microsoft’s Q1 profit surged 65 percent to $4.93 billion, boosted by sales of Vista, while the Recording Industry’s profits have plummeted.

Let’s translate: deaggregate performance based streams? Convert them into unprotected WMA downloads? Yes, that’s right: Sound Recorder records. Sounds. Those sounds can be stored as files. You can do things with those files. And supposedly, Microsoft has just made billions of dollars off Vista thanks to the lame, crummy sound-editing application no one uses — erm, sorry, the malicious, pirate-aiding Great Satan that is Sound Recorder.

I’m glad they pointed this out, because otherwise I might have assumed that the many other features in Vista were the reason people bought the upgrade, not using Sound Recorder to illegally record songs.

Total insanity. What a relief that no one would take this idea seriously.

Scratch that: it turns out that SoundExchange’s negotiations with webcasters are now calling for protections against stream-ripping that apparently involve mandatory DRM on all streams. That explains SoundExchange’s sudden willingness to agree to caps — but they’ve pulled this issue out at the last minute, without being upfront with either Congress or webcasters, just as the new rate rules take into affect. Apparently they thought this could strong-arm webcasters into DRM they wanted all along.

And it gets worse. These “technology mandates” appear to be causing negotiations to break down between the record industry and webcasters. Read the details here (caution: this may hurt your head):
DiMA/SX negotiations falling apart once again

The “technology mandates” are a serious business. The implication by SoundExchange is that they won’t even sit at the negotiating table unless webcasters agree to put protections in place to stop stream ripping. Never mind that a miniscule fraction of listeners rip streams, let alone do it in such a way that would diminish the value of purchased songs and albums. Never mind that DRM isn’t the only way to stop ripping (see RAIN for a few suggestions).

Just how nasty is the DRM proposed by companies like MRT? Have a look at BlueBeat:

BlueBeat Software Download

A proprietary format, in a proprietary player app that’s Windows-only (in this case, ironically, built on Windows Media Player 9 — even though MRT regularly threatens Microsoft with legal action and encourages legal action against them by others). That’s obviously not good for anyone, Microsoft included. And, in fact, MRT points to the fact that even the RIAA has acknowledged they’re a likely choice of technologies to make this happen.

Scary stuff. What’s badly needed now is some mediation to bring negotiations back into line. So much music is tied up in commercial labels, this issue isn’t just going to go away. A solution really is needed. This is hardly the way to approach it.

Webcasters don’t yet have to pay new fees for their broadcast. But they’re still accruing debt — fast. Sort of like our credit card debt.

Webcasters may get a small break on the minimum fee, one that could literally have shut down “personalized” radio services. SoundExchange explains the deal thusly:

Under the new proposal, to be implemented by remand to the CRJs, SoundExchange has offered to cap the $500 per channel minimum fee at $50,000 per year for webcasters who agree to provide more detailed reporting of the music that they play and work to stop users from engaging in “streamripping” – turning Internet radio performances into a digital music library.

Note the big attached “ifs”, which are vaguely worded in the official SoundExchange announcement, and sound all the more threatening given, according to SoundExchange, the previous rates are already in effect. Whichever side you’re on here, you have to give SoundExchange some credit for, erm, negotiating skill. “Hey, so while you’re dangled over this bridge, I wonder if we might … negotiate some small items?”

The one shred of good news: apparently Congress has applied some pressure on SoundExchange to negotiate, meaning public action has actually made some difference. Whatever the ultimate solution, it’d be nice to think some sort of public involvement might push the government to do something effective.

Wired has some good reporting on this:
Net Radio Wins Partial Reprieve as Royalties Loom

Meanwhile, I have a partial vacation to get back to. See you soon.

SoundExchange Tells Congress Webcasters May Keep Streaming [Kurt Hanson / Radio and Internet Newsletter]

A number of SoundExchange’s olive branches have been largely publicity stunts, but this seems real:

1. July 15 is no longer D-Day. SoundExchange promises that, as long as broadcasters are negotiating with them and continue to pay previous rates, they don’t actually have to start coughing up money at the new rates. In other words, instead of the July 15 deadline being the melodramatic “Day the Music Dies,” it’s now more accurately the “Day the Music Tentatively Continues Under a Cloud of Uncertainty While Mysterious Closed-Door Bargaining Sessions Try to Find Some Amicable Solution, or Not, We’re Not Really Sure.”

2. Maybe SoundExchange won’t cripple mega-channel content, after all. The one side of this we hadn’t covered was that the SoundExchange position would require a minimum of US$500 per channel — meaning services like Pandora and Rhapsody would be instantly crippled because they have countless channels, rather than individualized channels in the traditional sense. Think “dog bites off Long Tail.” Supposedly they’re now making headway on this point.

SoundExchange specifically mentioned wanting to protect the interests of college radio and NPR, and anyone else who will keep negotiating with them. And if there’s one thing they love, it seems to be negotiating.

Let’s put it this way: uncertainty is bad for Internet Radio. So even if July 15 isn’t a deadline, after all (yay!), it is absolutely imperative for the business models going forward that SoundExchange and the broadcasters sort this out. As for what this means for musicians, as many of you wisely point out, the majors still dominate music listening and none of this tends to amount to much in the way of actual checks for most music creators. On the other hand, because these services are often looking for ways to monetize content, selling the actual music remains in their best interests, as well. My sense is, somewhere beyond this dark, complex era of negotiations, we may actually start to see a real business ecosystem grow around music listening, one that’s distinct from that of the radio and CD/vinyl album era. In the meantime, negotiations continue.

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.