By Jeremy Hallock
By James Khubiar
By Observer Staff
By Kelly Dearmore
By Jim Schutze
By Rachel Watts
By Lauren Drewes Daniels
In 1998, the most comprehensive copyright-reform package in a generation was passed, the Digital Millennium Copyright Act. It was enacted in the wake of the dot-com boom, when questions about intellectual property, artists' rights and fair use were popping up faster than you could say "start-up." Part of the act applied to streaming audio on the Internet--specifically music--and called on the Librarian of Congress to approve a fee structure for this burgeoning medium.
Under the structure of traditional radio, stations are expected to pay songwriters a fee for every one of their songs that is played, but they don't have to pay record labels for use of the recordings of those songs. In other words, every time a station plays "Crazy," songwriter Willie Nelson gets a royalty, but MCA and the estate of Patsy Cline do not. Terrestrial radio has been exempt from paying fees to the labels themselves for the simple fact that they are helping to promote the music. It's free advertising.
The folks at the Recording Industry Association of America--those wily chaps who garroted Napster--want to change all that and are helping create a whole new set of rules for online radio. Unlike with terrestrial radio, the RIAA wants labels to be compensated for music played online, and paid very nicely indeed, thank you.
On the other side of the coin are the online radio stations, which want to see Internet music treated the same as standard radio. And why not? Radio is radio, right? Nope. The RIAA argues that, unlike the imperfect analog signal of radio, Internet radio issues a "perfect" digital signal, which could destroy CD buying as we know it. Simply put, the RIAA just wants the major labels to control all music on the Web.
Since passage of the copyright act, both sides bickered back and forth, with the RIAA proposing that stations turn over a whopping 15 percent of their revenues, and the other side asking for the standard 3 percent already turned over by regular radio stations. Guess what? They couldn't agree. Eventually a panel was appointed to try and figure out what should be done. It was called the Copyright Arbitration Royalty Proceeding, and, like the fish that shares its acronym, it waded through a sea of muck from both sides for months before coming to a decision. And, like the lowly carp, it had no clue about the economics of the Internet, or of radio, or about how to combine the two.
Witnesses for the panel consisted of folks from the RIAA on one side and Internet radio broadcasters such as AOL and Clear Channel on the other; talk about your Scylla and Charybdis. Because no one from any private or dinky Web stations attended, the fate of the little guy rested in the hands of the large conglomerates that were fighting against the RIAA, but not exactly for streaming radio hobbyists or noncommercial radio. In other words, the little guy got screwed by The Man yet again.
In the end, this fishy panel decided to base the industry's fee structure on the only deal that had then been struck between the record companies and Web radio interests, an agreement between Yahoo! and the RIAA. Problem is, this pact was inked shortly after Yahoo! bought Dallas-based and Mark Cuban-owned Broadcast.com for stock worth $5.7 billion. That's right, Web radio's future is being based on the optimistic economic projections of a multibillion-dollar industry leader at the height of the dot-com boom, when everyone thought the Internet was a license to print money. Needless to say, Yahoo! at its peak had wholly different economics than JoJo and his Magic Streaming Radio Hour.
So what was the decision they came to? It's a flat, per song, per listener rate. Noncommercial radio stations that stream on the Web, such as Texas Christian University's KTCU-FM or UC Berkeley's KALX-FM, will have to pay $.0002 per song, per listener. Commercial radio stations that stream, such as Dallas' KDGE-FM or KPIG in Santa Cruz, will have to pay $.0007 per song, per listener. And the little guy who just wants to broadcast a Salute to the '80s from his iMac? He pays $.0014 per song, per listener. Yep, Internet-only radio stations and hobbyists get hit the hardest. That means eclectic, independent sites such as Beethoven.com's classical fare, 3wk.com's underground and indie site and Gothicradio.com's all-Vampyres-all-the-time format all may face imminent collapse.
Those fees may look small, but that shit adds up fast. Listen to Toby Sheets--who runs Rio Grande Mud Radio (www.riograndemud.com), an Internet station that plays mostly Texas artists--do some of the math.