Artist says data about her streaming song plays would be as valuable a royalty as money

Thursday, November 15, 2012 - 12:25pm

Zoë Keating is an interesting and very talented artist (hear some of her music here) who's educated herself on the history of royalties and Internet radio. And she's thought a lot about the Internet Radio Fairness Act.

Her conclusions: (A) Even more than the money, she's interested in data -- information about the plays she's getting on streaming services that will help her grow her business; and (B) She thinks the best solution to royalties would be a single, same-across-the-board royalty for Internet radio, satellite radio, and broadcast.

"I want my data and in 2012 I see absolutely no reason why I shouldn’t own it," she posted to her blog. In fact, she'd rather be paid her royalty in data than money.

Keating explains that if she knew more about the context in which her music is heard ("Do these listeners also own my music? How many of these listens are on Zoë Keating stations? What other user stations do I pop up in, and sandwiched between what other artists? How many listeners gave me a 'thumbs up'?"), she could leverage that information to fine-tune her marketing efforts ("How do I reach them? Do they know I’m performing nearby next month? How can I tell them I have a new album coming out?").

"The new model says that in the future I’m not supposed to sell music: I’m supposed to sell concert tickets and tshirts. OK fine, so put me in touch with the people who will buy concert tickets and tshirts."

Her solution to the current royalty standoff is to simply give all forms of radio (including AM/FM) the same royalty rate ("One Royalty Rate to Rule Them All," in her words).

By the way, you can see Keating's Internet royalty earnings for 2011 and 2012 online here. Her blog entry is here.

IRFA critics accuse Pandora of asking for an "unfair subsidy"

Thursday, November 15, 2012 - 12:25pm

A group of 125 of the recording industry's biggest names are throwing their star power behind major record label efforts to oppose Net radio royalty reform.

"That's not fair and that's not how partners work together," reads the two-page "open letter" to leading webcaster Pandora in this weekend's Billboard magazine, signed by stars like Sheryl Crow, Pink Floyd, Billy Joel, and Katy Perry. The ad was placed by recording industry lobby musicFIRST and digital royalty group and industry advocate SoundExchange (below, click the image to read it).

Pandora supports the "Internet Radio Fairness Act" -- proposed legislation that would require copyright judges who determine the royalties webcasters pay for the use copyright sound recordings to use the same legal standard they use when determining the same royalties of satellite and cable radio (we have lots of coverage here). Major recording labels have come out in staunch opposition to the bill.

The ad accuses Pandora of enjoying "phenomenal success as a Wall Street company" yet of asking Congress to "gut the royalties thousands of musicians rely upon." A musicFIRST/SoundExchange joint press release from Wednesday calls the Internet Radio Fairness Act a "subsidy," which "could slash by 85% royalties paid to musicians and artists when their songs are played over Internet radio." 

Speaking in support of the bill on Tuesday (RAIN coverage here), Sen. Ron Wyden (D-OR) said, "Music is still dominated and controlled by a couple of multi-national corporations (which) act like a duopoly to maximize their profits, and not maximize the compensation of artists and not maximize musical choice... They are the people that made 'payola' a household word." Wyden himself introduced the Internet Radio Fairness Act in the Senate in September.

Last month, Pandora founder Tim Westergren (in RAIN here) revealed that in 2012 alone his service will pay nearly $3 million each in royalties to play the music of performers Drake and Lil Wayne -- half of which goes directly to the songs' performers. The music of Coldplay, Adele, Wiz Khalifa, and Jason Aldean will generate from Pandora more than a million dollars each this year.

The musicFIRST/SoundExchange press release is here.

RAIN Analysis: It’s ironic that the organizations are making an appeal for "fairness" when, in fact, what they’re fighting for is specifically to keep the concept of "fairness" out of the rate-setting standard for Internet radio.

The "801(b) standard" is the set of four criteria that Congress has historically typically instructed the U.S. Copyright Office to use to determine a royalty rate: (1) Maximize the availability of creative works to the public. (2) Insure a fair return for copyright owners and a fair income for copyright users. (3) Reflect relative roles of capital investment, cost, and risk. (4) Minimize disruptive impact on the industries involved.

801(b) is the standard used in other forms of digital radio, like satellite radio and cable radio, and it accurately reflects the public policy goal of copyright law, which is to maximize the availability of creative works to the public, using the concept of "fairness" for both creators and distributors.

By prevailing upon Congress in 1998 to change the rate-setting standard for Internet radio to the rate "which a willing buyer and a willing seller would agree to," the music industry has introduced confusion that has hamstrung the growth of Internet radio ever since. Because of the difficulty of applying this standard – since this is a marketplace in which a "willing buyer/willing seller" rate has never been determined – the judges in both rate-setting cases so far (2002 and 2009) ended up setting rates that were, for the majority of webcasters, greater than 100% of their revenues. Such a rate is far higher than the 7% to 15% rates that other forms of digital radio pay under the 801(b) standard, and it’s far higher than any "willing buyer" could actually afford to pay. -- KH

Founder Westergren links artists' digital fortunes to Pandora's

Wednesday, November 14, 2012 - 11:50am

Pandora founder and chief strategy officer Tim Westergren told Future of Music Summit attendees that you can already see what the "unfair" royalty structure has done to the Internet radio industry.

AOL, Yahoo!, and MSN were all major webcasters that have left the business. Pandora itself is "a Jekyll and Hyde business" that's doubled revenue every two years yet has struggled to make a profit. He says his company's 75% share of the webcasting industry shows "nobody wants any part of this business," and that includes some major broadcasters.

Royalty reform, such as the Internet Radio Fairness Act (more here), would bring investment and competition to the space, Westergren insists, which means more opportunity for artists to get exposure and royalties. Internet radio is "massively underinvested," Westergren said. "When we see a win-win opportunity, we should all embrace it... We're saying that if you reduce this burden, internet radio will grow a lot faster and a rising tide will raise all boats."

IRFA sponsor Wyden says public policy shouldn't favor one business over another

Wednesday, November 14, 2012 - 11:50am

Oregon Senator Ron Wyden (D), who introduced the Internet Radio Fairness Act in the U.S. Senate in September, says the debate over Internet radio royalties is a battle between entrenched interests and a healthy future for music. His bill, he insists, is about ensuring a fair market that will help webcasting grow, leading to "more income for artists, and more music choices for consumers." Pitted against that future are "a few big record companies... (who) are using uncompetitive practices to crowd out the competition," Wyden told attendees of the Future of Music Summit yesterday in Washington, D.C.

He made a case that artists and independent labels should be siding with the webcasting industry in support of the new legislation, as they stand to benefit from a more robust Internet radio market his bill hopes to enable.

"The history of American music is one of artistic creativity, technological advancement, and particularly those innovators - the dreamers - who are willing to disrupt the status quo. And in my view, we've got to make sure that's what the future is all about," he said.

Wyden's Internet Radio Fairness Act (IRFA) seeks to reform the process by which Internet radio royalties are determined by requiring judges use the same legal standard they use when setting satellite and cable radio rates, known as 801(b). Currently, Internet radio is unique in that (as mandated by 1998's Digital Millennium Copyright Act), judges determine a rate based on what they feel a "willing buyer" and "willing seller" would agree to in a hypothetical market. While satellite and cable radio pay about 8% of their revenue for royalties, Internet radio rates have equaled 50-70% (or more) of revenue for webcasters. 

"It is the job of policymakers to ensure that the law and public policy doesn't favor one business model over another, and particularly that it doesn't favor incumbents over insurgents," said Wyden. "We've got to make sure that the past doesn't get a leg up on the future, and I think a lot of you remember that in these kinds of debates, it seems like the future doesn't have a lobbyist."

Read Wyden's speech in Digital Music News here

Cox latest broadcaster to support Internet Radio Fairness Act

Tuesday, November 13, 2012 - 12:45pm

The Cox Media Group has officially announced its support of the Internet Radio Fairness Act (details of the bill are here) that would move Internet radio royalty determinations away from the controversial "willing buyer willing seller" standard to the more widely-accepted 801(b) standard.

"We believe the current royalty system for Internet radio actually hinders its future and growth," CMG Director of Communications Andy McDill said. "Cox Media Group strongly believes in a vibrant Internet radio marketplace, where artists, broadcasters and our listeners benefit from a sustainable rate setting process."

Other broadcast groups supporting the bill include Clear Channel and Salem Communications. Other supporters include webcasters like Pandora, Radio Paradise, and AccuRadio; plus groups like the Consumer Electronics Association and the Computer and Commmunications Industry Association.

While the NAB hasn't explicitly signed on as a supporter of the IRFA, when the bill was introduced the group said it "strongly supports legislative efforts to establish fair webcast streaming rates. NAB will work with the bill's sponsors and all interested parties to create broadcast radio streaming rates that promote new distribution platforms and new revenue streams that foster the future growth of music" (here).

Read more in Radio Online here.

Fairness Act's critics say current standard means "real market value" for music, 801(b) simply means "lower rates"

Tuesday, November 13, 2012 - 12:45pm

When it comes to an issues as complex and contentious as copyright, artist compensation, and fair business, maybe real clarity was simply too tall an order. A panel with four intelligent and strongly-opinionated players whose top goal is to advocate their position (and not necessarily educate an audience) arguing for 40 minutes was doomed to (as they say) generate more heat than light.

Truly the Future of Music Coalition put together a great panel of speakers (as well as a truly terrific day of content). Unfortunately, as it goes with issues like this, it's arguable whether any audience member was able to come away with a cooler or clearer head.

Today's discussion at the Future of Music Summit event in Washington, D.C. focused on the Internet Radio Fairness Act. Arguing against the bill was musical artist and University of Georgia lecturer David Lowery, Assc. General Counsel of the AFM Patricia Polach, and SoundExchange General Counsel Colin Rushing (the latter two are pictured at right).

CEA SVP/Government Affairs Michael Petricone and AccuRadio founder Kurt Hanson (publisher of this news source) spoke in support of the bill.

[The chief objective of the IRFA, a bill that's been introduced to both the House and the Senate, is to require Internet radio sound recording royalties, when determined by the government, to be based on the legal standard known as 801(b). 801(b) requires the government to consider the effects of its decision on the public's access to copyright material and the businesses involved, and is the standard used for satellite radio and cable radio royalty rates. Critics of the IRFA prefer the current "willing buyer willing seller" standard -- unique to Internet radio -- which they say leads to royalty rates based on a "fair market value" for music.]

Perhaps most frustrating was the lack of any real back-and-forth on the actual merits of the 801(b) versus the "willing buyer willing seller" standards.

For instance, panelists arguing against the IRFA suggested that it's not logical to change the royalties standard "used by thousands of webcasters" to one used "by only two services" (SiriusXM and Music Choice) -- ignoring the fact that those two companies represent two entire industries (satellite radio and cable radio). Additionally, Rushing and Polach asserted that "willing buyer willing seller" determinations are fair because they truly represent some objective and universal "fair market value" for music. Hanson tried to demonstrate the absurdity of this by suggesting the fair market wouldn't pay fifty cents for his cat that he values at thousands of dollars, but no one seemed interested in following his logic. Rushing and Polach simply complained that advocating for 801(b) was asking for a "below market rate."

In fact, an audience member tried to get panelists to address "just what is it that's wrong with 801(b)," as it's the same standard used to set rates that record labels themselves pay for musical compositions. The only response to this point came from Rushing, whose argument came down to "mechanicals (royalty rate settings) are very different."

Undoubtedly farthest afield were the arguments from Lowery (the second photo has Hanson on the left, Lowery on the right). Concentrating on the bill's less-publicized points (we covered David Oxenford's excellent piece regarding these here), he seemed more intent on being provocative than logical. He argued that the IRFA's measures that remove "the precedential effect" of past royalty decisions on future decisions would be "killing my free speech" and "muzzling artists." His claim is that the IRFA isn't even about rates, "this entire bill is about 'agency capture' -- broadcasters taking over copyright."

The understated Petricone assured Lowery that truly objectionable details could be ironed out in the committee process, and weren't call for abandoning the entire bill.

We understand Backbone Networks (which is streaming the Summit live) will soon post archived audio of the panel. We'll let you know where when they do.

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