Hanson, CEA's Petricone to represent IRFA advocates in industry discussion

Monday, November 12, 2012 - 2:05pm

RAIN publisher and AccuRadio CEO Kurt Hanson will speak at tomorrow's Future of Music Summit in Washington, D.C., taking part in the panel "Radio-active: Internet Broadcasting and Artist Compensation."

Panelists will discuss the lack of parity when it comes to how different forms of radio pay for the use of copyright compositions and recordings -- and more specificially, about the Internet Radio Fairness Act (IRFA, more here). The IRFA would move Internet radio sound recording rate determination to the more universal 801(b) standard. Advocates say this would make for a more equitable and healthy marketplace, but critics only see it as a reduction in artist revenues.

Oregon Senator Ron Wyden (D), who introduced the Internet Radio Fairness Act (S.3609) in the Senate in September will keynote the conference. Pandora founder Tim Westergren will also speak.

As we reported (here), the Future of Music Summit is sold out, but will be streamed by Backbone Networks and TuneIn (here, where you can now tune in to audio highlights from past FoMC Summits).

The Internet radio panel will be moderated by Washington Post pop music critic Chris Richards. The other scheduled panelists are David Lowery (former frontman with the bands Cracker and Camper Van Beethoven, now a University of Georgia lecturer), CEA SVP/Government Affairs Michael Petricone, Assc. General Counsel of the AFM Patricia Polach, and SoundExchange General Counsel Colin Rushing.

See the Summit schedule here.

Internet Radio Fairness Act co-sponsor Stark fails in re-election

Wednesday, November 7, 2012 - 1:35pm

Rep. Pete Stark lost his re-election bid last night to fellow Democrat Eric Swalwell, which means the IRFA, for now, has one fewer co-sponsor.

Stark, a long-time Democratic Congressman from California, was one of the original House co-sponsors of H.R.6480, The Internet Radio Fairness Act, introduced by Utah Republican Representative Jason Chaffetz in September (background here).

Chaffetz, and all other co-sponors of the bill in the House, were successful in their re-election bids. The remaining co-sponsors are Rep. Jared Polis (D-CO), Rep. Darrell Issa (R-CA), Rep. Zoe Lofgren (D-CA), Rep. Gene Green (D-TX), and Rep. Mike Coffman (R-CO).

The Senate counterpart bill, S.3609, was introduced by Oregon Democrat Ron Wyden. He was not up for re-election this year.

You may remember proposed opposing legislation, the Interim FIRST Act, released as a "discussion draft" by New York Democratic Rep. Jerrold Nadler (more here). He also handily won his re-election last night.

Public interest policy group suggests IRFA could give performers bigger royalty share

Wednesday, November 7, 2012 - 1:35pm

Washington, D.C.-based public policy organization Public Knowledge supports the proposed standard-change for Internet radio royalty proceedings, with the ultimate goal of robust and sustainable business models for all players in the digital music marketplace. This week the group has published an essay to explain its support, and suggest a few key improvements to the relevant bill now in Congress.

Public Knowledge staff attorney Jodie Griffin wrote the piece, the follow-up on an introductory essay we covered last week in RAIN here.

First-and-foremost, Public Knowledge advocates the use of the Copyright Act's 801(b) standard for determining Internet radio royalties, the focal point of the Internet Radio Fairness Act.

The IRFA, a bill now in both the U.S. House and Senate, 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 fact that there was no robust online radio licensing market for sound recordings prior to 1998 meant that the judges charged with setting the compulsory license rates were effectively told to emulate a market that did not exist," Griffin reasons. "It is unsurprising that the current standard has led to a disproportionate burden on online-only radio services."

By requiring use of the 801(b) standard for Internet radio, the IRFA would bring it in line with other forms of digital radio, like satellite and cable. Read more in RAIN here. Setting webcasting royalty rates using 801(b), writes Griffin, "allows and requires the CRJs to consider the entire online radio ecosystem when it sets the rates, rather than solely attempting to recreate a market that never existed."

What's more, since webcasters like Pandora make the "same type of use" of music as satellite- and cable-radio (that is, it's "performed" on a non-interactive platform -- it's not "on-demand," nor do webcasters sell downloads, etc.), rates should be set by the same standard. Answering critics of the IRFA, she writes, "This does not mean that the actual fees need to be the same for every service, but simply that all similar services will be evaluated by the same standard."

Griffin suggests, however, that the IRFA should be amended "to truly be technology-neutral and to fairly balance the interests at stake in the radio marketplace."

One interesting measure would allow the adjustment of the "50/45/5%" split of statutory royalties.

[NOTE: Currently, half of the money webcasters pay in statutory royalties (after SoundExchange's vig) goes to the copyright owner of the sound recording (most usually, the record label). The other half is split between a recording's "featured performer," who gets 45%, and back-up musicians and vocalists (through their unions), who split the remaining 5%.]

Griffin argues an amended IRFA should allow for an adjusted split, for example, giving the label 40%, then 50% to the featured artist, and 10% for side musicians and backup vocalists. This would "alleviate the risk put upon artists of lower revenues by guaranteeing them a larger piece of the royalty pie."

Another way to improve the IRFA, Griffin says, would be to include a sound recording performance royalty requirement for AM/FM radio.

The fact that legacy radio broadcasters do not pay labels and performers, and services that were existing at the time of the DMCA (satellite and cable) pay a small percentage of revenue, while webcasters pay such weighty rates "is the opposite of what copyright policy should be," the piece reads. "We should be encouraging new market entrants to reach broader audiences through innovative technologies and to pay a fair price for their use of the works. Disproportionately burdening the most innovative companies in the business is no way to help the music industry find sustainable business models in the digital world."

For all of this, however, the Public Knowledge piece stresses how important it is to gather ample data on the marketplace, study "the economic incentives and business relationships that affect how much money ends up in the actual artist’s pocket," and monitor how changes to royalty schemes affect performers, copyright owners, and services alike.

Read the Public Knowledge piece here.

House subcommittee Internet Radio Fairness Act hearing reportedly this month

Tuesday, November 6, 2012 - 2:00pm

Late last month we heard (our report here) the House Judiciary's Subcommittee on Intellectual Property, Competition, and the Internet would hold a hearing on Internet radio royalties. now reports its sources say a hearing will likely take place at the end of this month, "on or around November 27, 28 or 29."

Lawmakers will hear testimony regarding on the Internet Radio Fairness Act, recently introduced to both chambers of Congress. The IRFA would require copyright judges to use the same "801(b)" standard in setting the royalty rates for Internet radio it uses for other forms of digital radio, like cable and satellite. Read more here. Billboard's sources say Pandora and a broadcaster will likely testify in favor of the bill, and SoundExchange and a recording artist will likely testify against.

The House bill, H.R.6480, is co-sponsored by subcommittee members Jason Chaffetz (R-UT), Darrell Issa (R-CA), and Zoe Lofgren (D-CA).

Read here.

Top webcaster sues songwriter/publisher group ASCAP for lower fees

Tuesday, November 6, 2012 - 2:00pm

Pandora has filed suit against ASCAP (the American Society of Composers, Authors and Publishers) in New York federal court, hoping to force the organization to grant it a "blanket" licensing fee for all of ASCAP's works.

The suit follows more than a year of negotiations in which the two sides were unable to settle.

Pandora is one of several webcasters, broadcasters, and technology groups supporting the Internet Radio Fairness Act in Congress, legislation advocates hope will lead to a reduction in the fees webcasters pay for the use of copyright sound recordings.

The fees webcasters like Pandora pay to ASCAP (and similar groups BMI and SESAC), on the other hand, involve copyright song compositions. The benefactors of such royalties are songwriters and publishers.

Pandora reportedly wants -- and ASCAP refuses -- the same terms as broadcasters. Earlier this year ASCAP reached a deal with the Radio Music Licensing Committee, which represents large broadcasters. The deal has radio broadcasters paying 1.7% of their gross revenue, minus deductions based on advertising commissions.

ASCAP and Pandora reached what was called an "experimental" accord on composition fees for the 2005-2010 term. Pandora's suit is for the term ending 2015.

Relatedly, Sony/ATV, a publisher with huge rights holdings, is pulling out of ASCAP to administer its own digital royalties (more here). This adds to webcasters' complications, as the group would be yet another organization with which to negotiate yet another fee. Though such a move should presumably reduce ASCAP fees, it's not known what it would mean for the overall amount webcasters pay to use copyright song compositions.

Read more in Bloomberg here.

Like presidential opponents, royalty bill foes rail against "burdensome regulation" and "cheating the middle class"

Monday, November 5, 2012 - 12:05pm

An article in yesterday's New York Times likens the conflict over Internet radio royalties to the presidential race: business suffering under government-inflicted costs vs. wealthy industrialists cheating the middle class.

What the different players are saying sure makes the comparison apt.

Pandora founder Tim Westergren told journalist Ben Sisario, "This adversarial reaction toward Internet radio is counterproductive. It’s causing other businesses to sit on the sidelines, and that is hurting musicians. Ultimately, you want to have many boats in the harbor."

But MusicFirst Coalition, the record industry group that's the main face in the fight against proposed royalty reform, "says it believes that if Pandora gets everything it wants, it could cut its royalty bill by up to 85%," writes Sisario.

The Internet Radio Fairness Act, co-sponsored in the House of Representatives by Republican Congressman Jason Chaffetz of Utah (more here), would require Copyright Judges who determine Internet radio's royalty rates to make their decisions using the "801(b)" standard of Copyright Law, instead of the controversial "willing buyer willing seller." Webcasters like Pandora support the bill, as all other forms of digital radio have their royalties set using 801(b). The music industry is firmly against the bill.

Westergren said, "No one has yet explained to us why Internet radio is under a different standard. No one responds to that fundamental premise."

Naturally, for RIAA CEO Cary Sherman, it's really a matter of companies like Pandora trying to cheat the "entire music community" out of "a fair return on the creative works that are the reason companies like Pandora exist."

Clear Channel CEO Bob Pittman is largely credited with making his company a major online radio force with its launch of the iHeartRadio platform. He says the record industry is wrong to focus on rates. With lower rates, more companies will stream more music, and lead to more income. "If the rate suppresses the volume, there’s less money. If it encourages volume, there’s more money."

Of everyone siding with Internet radio services, it was Rep. Chaffetz himself who stood out with a shot at the music industry establishment: "The old-school dinosaurs are trying to help, but they’re stuck in the tar. They can go talk to the pterodactyls."

Read the New York Times article here.

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