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.
"Let's look at one of the top-rated stations on the Internet right now, Digitally Imported," Sheets says, referring to Digitally Imported's stats on shoutcast.com. "At just about any given time of day you will see about 2,000-plus listeners tuned in. Now assume a radio station has only one listener tuned in 24 hours a day for one year. In a typical hour, depending on the style of music you play, you can average 10 to 15 songs per hour. Let's say 10 to make the math easy. So 10 songs per hour times 24 hours a day times 365 days a year times $0.0014 per song played gives you a bill of $122.64.
"Now Digitally Imported has at least 2,000 listeners on a continuous basis," Sheets continues. "So take that $122.64 and multiply it by 2,000 and they have a bill of $245,280. This is a commercial-free station, mind you, so expenses in fees alone is 200,000 percent of their income, let alone the bandwidth they are already paying for to accommodate 2,000-plus listeners at the highest bandwidth possible. Add to that the money they have to pay to buy CDs and the proposed fees for making a digital copy of each song to their hard drive--an 'ephemeral copy'--and they are going to go broke."
Consequently, even commercial stations such as KPIG will have to cease streaming. If they play 10 songs in one hour with 1,000 listeners, that's $7 an hour, which adds up to additional annual expenses of more than $60,000. "It's obvious that the RIAA would like to keep all control of music on the Web in their own hands: pay to listen, pay to download," says Bill Goldsmith, program consultant for KPIG. "That's their ultimate goal." Goldsmith, who also streams the "eclectic, intelligent rock" station RadioParadise.com, says that the panel's decision will kill off any Web presence for his stations. "RadioParadise.com has a total income that's about 50 percent of what the royalty fees would be under the CARP proposal. It'll be about $7,000 a month, and my income is half that."
Sheets considers himself one of the lucky ones--for now. "Fortunately I play a lot of unsigned artists--up to 80 percent of my playlist--so I think I won't be hit as hard," he says. "Honestly, there's enough unsigned artists from Texas that I can get away without playing national artists. But the basic problem is that these regulations will squash the growth of Internet before it has a chance to really evolve in the way radio evolved when it first started. The rulings seem to be an opportunity for the Big Five labels to squash any competition in the Internet radio industry."
To wit: KALX, which has the capacity to serve a whopping 60 online listeners at any one time but rarely reaches that mark, will shut down its Web stream if the decision is finalized in May, according to general manager Sandra Wasson. "A lot of stations have already gone off the air," she says, referring to fellow Bay Area college stations KUSF and KSJS. Although the noncommercial rates are much lower than those of commercial stations, the estimated $1,200 a year that KALX would have to pay to serve these 60 listeners still adds up to far more than it is currently required to pay songwriters by ASCAP ($244 per year), BMI ($244) and SESAC ($66).
Not only is KALX not going to shell out the extra dough, it also couldn't possibly accommodate the ridiculous record-keeping requirements of the plan. All online stations would also have to create voluminous reports filled with user data. For each song played, more than 30 items must be logged including: date, time, time zone (!), recording length, release year of track, ISRC code, UPC code, label, catalog number and on and on. Keeping track of this data will be so time-consuming that someone would have to be hired solely to gather it, and that ain't gonna happen at KALX. Regular radio stations are not required to do any of this, except for an occasional songlist/songwriter audit over a period of a couple of days. These rules set forth for streamers are nothing short of bullshit busywork designed to deter anyone from wanting to have a Web station of any kind.
"For the most part, the radio industry understands the need to compensate copyright holders," says George Bundy of the Web radio consultancy BRS Media, who adds that everyone involved agrees that some royalties should be paid. "But the benchmark has been set too high."
The union of recording artists doesn't always see eye to eye with the RIAA, but on this issue they stand together. Ann Chaitovitz from the American Federation of Television and Radio Artists supports the new fee structure. "What I really see is that Webcasters are crying wolf," she says, noting that streamers have heretofore had a free ride. She says the proposed fees are not only fair, but smaller than what artists really deserve. Chaitovitz also quarrels with regular radio's fee structure, which pays songwriters but not performers. "We are trying to change the radio laws," she says. "We've been fighting for that since before the Internet."
As usual, the RIAA is milking the cause of standing up for the "creators." "The concern is that the creators should be paid by those who are using their work," says Steven Marks, senior vice president for business and legal affairs with the RIAA. But what about all the promotion that artists and record companies get when their music is played online? Doesn't that sell records and help artists? Marks says no: "The arbitrators found that there was no verifiable evidence that there was any promotion."
This argument is completely nuts, not to mention inconsistent. Why is KFOG's conventional broadcasting promotional, but its simultaneous Web stream not? The RIAA would argue that regular radio shouldn't be considered promotional either. "You don't get a car for free because you are driving around with a Ford decal," Marks says.
What's really happening here is that the RIAA is carrying its victory over Napster and digital downloading into the streaming radio arena. Its argument is that, since online signals are digital ones, they are therefore a threat to CD buying. Never mind that you can't burn a CD from a streaming radio signal, and often you can't even listen to a single song without annoying burps or farts. Somehow the CARP panel bought this crap, and now RIAA actually will start earning revenues from Internet radio that it cannot recoup from regular radio.
The next question might be, what will happen when regular radio signals go digital as well, which experts point out is the industry's next step. After decades spent fighting blank-tape manufacturers, students downloading free stuff on the Web and now Web radio, the RIAA may at last be able to squeeze money out of the people who help them the most: conventional radio. Bundy believes terrestrial radio will still be protected, digital or not. And both Chaitovitz and Marks say their organizations have no interest in sticking it to tiny Web radio enthusiasts. "We look forward to working with the hobbyists," Marks says.
Do any of you have visions of RIAA folks nestled on a rag rug with Uncle Mort and his iBook, helping him stream big band music? When the RIAA says "work with," it will probably be just like when the Germans "worked with" the Poles in '39, or when a goodfella "works with" a shopkeeper in the form of easy monthly payments. The RIAA's interests begin and end with the economic interests of the big record labels. What's most appalling is how willingly it hangs its arguments on the interests of the "musical creators" it so dearly fucks over in most other cases.
"There's a growing sense of public outrage," says Bill Goldsmith from KPIG. "It's such a black-and-white, David-and-Goliath type of thing. You've got these struggling baby Webcasters like me, and this great big monolithic group of multinational corporations on the other side." Goldsmith holds out the hope that public outcry will convince the panel to reverse its decision, even though the only people who can officially argue against it are those same entities involved in the original ruling. The public has no say, except to contact their congressmen and hope that they will lobby on their behalf.
But George Bundy is flat-out pessimistic about the May 21 deadline. "I think there is a lot of work to be done and not enough time. Unless the opposition moves quicker, it will get rubber-stamped."
For the rest of us, the party is almost over. Stations will be forced to charge listeners, or cover the costs through the sale of advertising (fat chance), or give up altogether. It's time to come to terms with the fact that most streaming radio will be a thing of the past.