Battle over internet radio continues

The movement to save internet radio from the disastrous jacked-up recording industry royalty fees that will potentially shut down most webcasters is gaining momentum.

Background

If you're unfamiliar with this issue, it's a fairly complex subject, but here's a quick recap: last March, a 3-judge panel called the Copyright Royalty Board, or CRB, voted to change royalty fees paid by net broadcasters from a straight percentage-of-profits model to a "per-song, per-listener" scheme, regardless of any income (or lack thereof) the station might have from advertising, subscriptions, or donations. Representing an increase of 300 to 1200 percent, the new rates which go into effect on July 15th are retroactive to January 2006 and will put most stations -- including many Public Radio outlets -- out of business. (See this Newsweek article for more info.)

To put this in perspective, imagine for a moment you have an income of $40,000 a year and you're taxed at 15% by the IRS, so you pay them $6,000. Then one day you get a letter informing you that the new tax amount on your $40,000 income will be $72,000 (a 12x increase). Wouldn't make much sense, would it -- how can you pay more than you make? Now imagine you have zero income, but your tax is still $72,000! WTF??

Congress Gets Involved

In the weeks since the initial ruling, a grassroots movement has sprung up among internet broadcasters and their listeners seeking to overturn the CRB's flawed decision. Two bills (H.R.2060 in the House, and S.1353 in the Senate), together known as the "Internet Radio Equality Act", would establish fair and reasonable fees paid to those who create music, while assuring that net radio will not be killed off. Considering that most legislation languishes on Capitol Hill with very little interest from the general public, these measures have picked up phenomenal support in a very short period of time, as thousands of people (including myself, and hopefully some of y'all as well) have written or phoned their elected representatives to tell them that they do not want internet radio to become extinct.

Predictably, the RIAA (through its affiliated organization that actually collects the fees, known as SoundExchange) immediately cranked up the rhetoric by issuing a press release referring to the legislation as a "money grab by corporate webcasters". Among other patently false statements, they claim that the bills are a "blatant attempt to strip artists and record labels of their hard-won royalties for the use of their sound recordings on Internet Radio". (Click here to read a short article debunking the RIAA's absurd propaganda.)

Business Week magazine's online edition recently took an in-depth look at both sides of this issue, first presenting an article dated May 11th by SoundExchange director John Simson. At last count it had received over 60 comments, nearly all of them taking the view expressed in the words of one reader who said, "what a transparent load of crap from Mr. Simson." In contrast, four days later BW published the reasoned viewpoint of Laurie Joulie of Roots Music Association to much more favorable reader response; it's therefore quite easy to see where public sentiments lie on the matter.

Latest Skirmish

As a direct result of the outpouring of support for the House and Senate bills, SoundExchange got a letter last week from Representatives Howard L. Berman (D-CA) and Howard Coble (R-NC). Acting as part of the House Judiciary Subcommittee on Courts, the Internet and Intellectual Property, the Congressmen urged the RIAA to "initiate good faith private negotiations with small commercial and noncommercial webcasters with the shared goal of ensuring their continued operations and viability." Sensing the tide of public opinion turning against them and fearing legislative intervention, the RIAA has made a so-called "compromise offer" to defer imposition of new fees to what it terms "small webcasters" until 2010, while proceeding with the increases as planned for everyone else. But this alleged "compromise" is a Trojan Horse that would still stifle internet radio. For one thing, it doesn't offer to change the new fee structure, only to postpone it. This would be like the IRS in our hypothetical example above saying, "You still owe us the money, but we'll give you until 2010 to pay it." For another thing:

“The proposal made by SoundExchange would throw 'large webcasters' under the bus and end any 'small' webcaster’s hopes of one day becoming big,” SaveNetRadio spokesperson Jake Ward said. “Under Government-set revenue caps, webcasters will invest less, innovate less and promote less. Under this proposal, internet radio would become a lousy long-term business, unable to compete effectively against big broadcast and big satellite radio – artists, webcasters, and listeners be damned.”

SaveNetRadio said that this kind of charging w ould put internet radio out of business, and is not what was intended by US lawmakers.

"A standard that would set a royalty rate more than 300% of a webcaster’s revenue was not what Congress had in mind, and it must be adjusted if the industry is going to survive."

You can still help

The Internet Radio Equality Act still needs your support. Even if you've already contacted your representative, don't let off the pressure. This sort of lobbying is exactly how things are accomplished in Washington, so please use the handy tool below which will provide information regarding who to contact as well as some talking points if you need them:

Find Your Senators
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The I.R.E.A. would establish that webcasters pay a fair and reasonable fee of 7.5% of their revenue in royalties, the same rate paid by satellite radio broadcasters. Traditional over-the-air broadcast radio does not pay anything because labels consider airtime to be promotional, an arrangement that has existed for the last 70 years. It's based on the long-accepted idea that if you hear a song you like on the radio, there's a good chance you might buy a CD by that artist. However, with recent CD sales in free-fall for a variety of reasons (not the least of which being the stupidity and arrogance of the record companies) the RIAA is becoming increasingly desperate, and terrestrial radio is very likely to be their next target.

More on that in another post.