Radio lobbies against royalties, labels counter with ad, nothing changes for webcasters

Wednesday, March 6, 2013 - 1:10pm

Lawmakers have made it pretty clear they don't want to hear about webcasting royalties any more -- including the Internet Radio Fairness Act -- before they deal with sound recording royalties for broadcast radio.

Inside Radio reports some radio executives are using the occasion of a conference in D.C. to visit with members of Congress and ask support for the "Local Radio Freedom Act." The non-binding resolution opposes any measure requiring U.S. broadcasters to pay sound recording performance rights (more from RAIN here).

Meanwhile, the record industry group musicFIRST Coalition answered with an ad in Politico (that's the image, full-size here), accusing broadcast radio of being "stuck in the past" (since other forms of radio like satellite, cable, and webcasters pay).

While the record industry publicly cites Internet radio as a paying customer for its copyright licenses, its representatives remain adamantly against measures that would likely bring webcast royalty rates in line with those paid by satellite and cable radio. The IRFA (more here) would require judges to use the same legal standard to determine statutory rates for streaming radio that they use for satellite and cable.

While satellite and cable radio royalty rates are determined using a legal standard known as 801(b), the 1998 Digital Millennium Copyright Act requires Internet radio rates be set using a different standard known as "willing buyer and willing seller." Unlike 801(b), "willing buyer and willing seller" ignores the "real world" ramifications of a rate determination, and all notions of fairness and minimizing industry disruption -- considerations of the 801(b) standard.

So while satellite radio pays about 9% of its revenue to license copyright sound recordings, leading webcaster Pandora pays well over half.

A late-November House Judiciary subcommittee hearing on the IRFA quickly lost focus on the bill as record industry witnesses (and the committee members sympathetic to them) steered the discussion to the AM/FM exemption (our coverage here).

Writing in Huffington Post, musician David Fagin blames the AM/FM exemption for lack of progress on webcasting issues: "Congress is scared to go after big radio and their lobby, and the RIAA is 'just fine' with the status quo. In the meantime, both sides have decided to just kick each other's asses, instead." (More in RAIN here).

CRB misapplied 801(b) in SiriusXM's favor, says Brookings' Villasenor

Monday, March 4, 2013 - 2:40pm

The Brookings Institution's John Villasenor, who's written extensively in support of a fairer standard for Internet radio royalties, calls satellite radio's royalty "too low by several percentage points."

Interestingly, Villasenor points to 801(b) itself at the root of the problem -- but it seems he blames the Copyright Royalty Board's interpretation of the standard more than the standard itself.

Villasenor may be familiar to RAIN readers (we've covered his writing several times here) for his calls for a change in the law that would have Internet radio royalties determined using the legal standard known as 801(b). This is the standard used to for satellite radio and cable radio royalties, as well as for the royalties recording labels pay composers and publishers to publish recordings.

[Currently, Internet radio royalties are determined using a different standard, known as "willing buyer / willing seller." Legislation known as the Internet Radio Fairness Act, now in both houses of Congress, would enact the standard change called for by Villasenor. More from RAIN on the IRFA is here.]

The 801(b) standard (among other criteria) requires the CRB to "minimize any disruptive impact on the structure of the industries involved and on generally prevailing industry practices."

The CRB decided the most appropriate rate for satellite radio for the 2013-2017 term would actually be 11% of gross revenue. But in its effort to minimize potential disruptive impact on SiriusXM, it decided to phase in the rate over the four years, beginning at 9% for 2013.

This is despite SiriusXM's 2009-2012 revenue growth, from less than $2.5 billion to over $3.4 billion.

Villasenor, who's also a UCLA electrical engineering professor, writes, "In fact, under the 9% rate that will apply for 2013, there’s a good argument that artists will suffer more disruption from their unfairly low income than SiriusXM will avoid thanks to its discounted payment obligations."

Read his article in Billboard here.

Citing royalties, Pandora limits free mobile listeners to 40 hours per month

Thursday, February 28, 2013 - 11:45am

Pandora announced via their blog yesterday they are limiting free/ad-supported mobile listening to 40 hours a month. Found Tim Westergren says it's about royalties.

"Pandora's per-track royalty rates have increased more than 25% over the last 3 years, including 9% in 2013 alone and are scheduled to increase an additional 16% over the next two years," he wrote. "After a close look at our overall listening, a 40-hour-per-month mobile listening limit allows us to manage these escalating costs with minimal listener disruption."

Pandora is the most visible industry player backing the Internet Radio Fairness Act, which they hope will decrease sound recording performance royalties with a change in the standard that's used to determine those rates. See more in RAIN here.

While the webcaster is monetizing mobile audience better than most, its ad revenues are just $26.96 per thousand listener hours on mobile, compared to $56.40 across all platforms.

According to Pandora, only 4% of listeners will be affected, as the average listener streams just 20 hours a month across all platforms. The limit is only on mobile listening, and does not affect paying "Pandora One" subscribers. Free mobile listeners are also given the option of paying 99 cents for unlimited listening for the rest of the month after they hit the limit.

This is not Pandora's time capping free listening. Prior to September 2011, free stream mobile and web listeners were limited to 40 hours per month.

Read the Pandora blog entry here.

Stock analyst calls out music industry for its treatment of Pandora

Wednesday, February 27, 2013 - 12:20pm

Yesterday Albert Fried & Company analyst Rich Tullo appeared on CNBC to discuss the news that record label sales were up last year for the first time since 1999. He used the opportunity to criticize the music industry and its treatment of music services like Pandora -- especially in regards to licensing and royalties.

"The industry is fighting the Pandoras and Spotifys," Tullo told CNBC. Tullo pledged his company "will help (Pandora) in Congress if called upon -- we do have certain beliefs about Internet radio freedom, and how it can be an ultimate good for the industry if the music producers top fighting change."

Pandora and other webcasters support the Internet Radio Fairness Act (more here), designed to make the Internet radio royalties more equitable by bringing the royalty rate determination process in line with those for other non-interactive digital music use (like satellite radio). The recording industry is in staunch opposition to the bill.

Watch video of Tullo's CNBC appearance here.

Rep. Chaffetz: Congress should pass laws to encourage, not discourage, American innovation

Thursday, February 14, 2013 - 1:10pm

As we reported yesterday (here), representatives of small business webcasters and independent musicians traveled to Washington, DC yesterday and visited with nearly two dozen House representatives and staffs. Their ultimate aim: the passage of legislation that not only would lighten Internet radio's sound recording royalty burden, but would encourage American innovation in this sector.

A dozen of these small webcasters visited with Rep. Jason Chaffetz (R-UT) to thank him for his House sponsorship of the Internet Radio Fairness Act (IRFA), and the leadership position he is taking.

Chaffetz spent 20 minutes with the group, making a impassioned and compelling case for the importance of Congress passing laws to encourage — and not discourage — American innovation.

The Internet Radio Fairness Act would change the legal standard by which judges determine the statutory rate for streaming radio. The royalty rates for most other, related uses of copyright sound recordings use the standards set in section 801(b) of the Copyright Act. The 1998 Digital Millennium Copyright Act made an exception for Internet radio, requiring rates to be set to what the judges felt a hypothetical "willing buyer and willing seller" would agree. The law would bring Internet radio in line with media like cable- and satellite radio, requiring rates to be set along 801(b) guidelines.

The IRFA was introduced into both chambers in the last Congress, and expected to be re-introduced this session.

In addition to webcasting professionals from operations like ShockNet Radio and HD Radio Network, several independent musicians joined the effort: Ivan Trevino of the instrumental rock band Break of Reality (more here), blogger and former member of The Rosenbergs David Fagin (read more from Fagin here), and country artist Bobby Ross.

Yesterday's group also included Liquid Compass CEO Zackary Lewis, Educational Media Foundation (EMF) in-house counsel Brian Gantman, and AccuRadio founder (and RAIN publisher) Kurt Hanson.

Small webcasters meeting today with lawmakers on Internet Radio Fairness Act

Wednesday, February 13, 2013 - 12:25pm

A group representing small business webcasters is in Washington, DC today to visit the offices of 21 members of the U.S. House of Representatives and Senate, to advocate support of legislation they say is necessary for their businesses to survive. 

Representatives of independent webcast operations like Prog Palace Radio, WSUI Online, Girls Rock Radio, Pearadio, and Musera travelled to Washington, DC from across the country to request lawmakers' support for the Internet Radio Fairness Act (background in RAIN here).

The IRFA was introduced into both chambers in the last Congress, and expected to be re-introduced this session. It would change the legal standard judges use to determine industry royalties to criteria known as "801(b)," the standard used for other forms of digital radio.

The group also includes Zackary Lewis, CEO of industry streaming and software provider Liquid Compass; Educational Media Foundation (EMF) in-house counsel Brian Gantman, and several independent musicians supporting the efforts of small webcasters.

RAIN publisher and AccuRadio founder Kurt Hanson, also part of today's "hill walk," said, "All we're here asking for is to use the 801(b) standard -- same as cable & satellite (radio) -- and to balance the needs of copyright owners, users, and the public."

We'll cover today's hill walk more extensively tomorrow in RAIN.

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