Techismo

July 12, 2007
Representative Chris Van Hollen

Dear Representative Van Hollen:

I’m writing to you regarding HR 2060 (the “Internet Radio Equality Act”) and the recent rulings of the Copyright Royalty Board. I spoke with your office back in April and was told that you had reached no decision on HR 2060 but that you were studying it carefully. When I phoned your office again today I found out that you are not currently supporting this bill.

I wish to state emphatically that you will lose my vote if you do not lend your support immediately to the survival of Internet Radio—and by Internet Radio, I DO NOT mean just the interests of large corporations. I mean the small, entrepreneurial—even hobbyist—radio stations that bring incredible diversity to the music world. Whether you never listen to an Internet radio station in your life or you listen to several stations daily in your office, you cannot ignore this issue and claim that you uphold the American tradition of free enterprise.

For Internet radio truly represents all that is good about innovation and free enterprise.

But let’s return to those larger issues after we’ve gotten up to speed on the more sticky technical questions immediately before us. The Copyright Royalty Board has ruled that Internet radio stations must pay a sizable increase in royalties on a per-song basis, linked to the number of listeners tuning in to a station. I must point out that this model of payment—both by the song and by the listener—is a burden not shared by standard (terrestrial) radio broadcasters, who represent the greatest revenue producers in the broadcast industry. Stated differently, Internet broadcasters (webcasters) unlike terrestrial broadcasters, must pay a fee for each listener.

The reasoning behind this is the same as if as listeners to an Internet radio station, we have all agreed to purchase the music played by that station. (Meanwhile, the law specifically prohibits us from selecting what we want to hear.) All that is under dispute, in fact, is the price to be paid for the privilege of purchasing that music. Indeed, not only are the broadcasters expected to pay up for each song we listen to, they are obviously expected to pay for it again each additional time we listen to it.

Personally, I prefer the pay for it once, listen to it many times model, which is what I do with the recordings I purchase directly for use at home. Imagine that the recording industry not only expected you to pay a rather exorbitant price for a CD (given that the actual material costs have declined over the years, while the price of the actual package you purchase in the store has at least held steady) but also expected you to pay additional fees each time you played a song from that CD. This is precisely the model under which the Royalty Board expects webcasters to operate. I hope you can see the unfairness.

Now step back and take a look at this whole picture and see what is wrong with it. Not only are the underlying machinations of the arrangement absurd, but there is an assumption here that as more and more marketing opportunities for the music industry arise—and Internet radio represents the greatest single breakthrough marketing opportunity for the music industry since radio itself—the recording industry is steadily impoverished. We’re supposed to believe that due to the potential proliferation of digital music, industry executives will be forced to live in smaller and smaller mansions.

What’s more, industry rants to the contrary, this isn’t about paying the artists, it’s about increasing industry revenues. As proof, I offer you the viewpoints of David Byrne, a successful musician of Talking Heads fame who operates an Internet radio station; of SONiA, a Baltimore musician who bills herself as an independent artist, and of Kenneth Rainey, a member of Tangleweed, a Chicago band that got its start thanks to Internet radio.

None of these artists wants to see the latest changes wrought on Internet radio become permanent. They see the subsequent demise of Internet radio as we now know it as a threat to the livelihood of up-and-coming artists and to the diversity of the music we ultimately have the chance to hear.

Rainey cites statistics: “Right now, independent artists make up less than 10 percent of what’s played on broadcast radio, but on Internet radio, we make up about 37 percent.”

SONiA looks at the big picture. “The reality is,” she says, “if these new royalty rates go into effect it will make it much harder for independent artists like me to get off the ground to find their audience. What’s worse for music lovers is that with such high fees, online radio will start to look a whole lot more like broadcast radio: a limited number of artists, a limited number of genres and a lot of bored music fans.”

Although she’s made it over the hump herself as an artist, SONiA is still concerned about the welfare of current and future undiscovered artists: “I’m not worried about me—I have had a great career, crisscrossing the country and traveling the world. I have been fortunate to have had broadcast radio support. But I’m concerned about the artists just now getting their start.”

So you see, Representative, there isn’t really much to debate about nor terribly much to study. The arrangement about to go into effect is simply incredibly bad, and almost any change in the right direction—including a simple arrangement whereby all stations, terrestrial and otherwise, pay a small fee tied to revenues or profits for the privilege of playing copyrighted materials—constitutes a considerable improvement.

By the way—and I think this is an important point if we are to preserve an entrepreneurial spirit in this country—this latter arrangement, whereby fees are linked to profits or revenues is the only one that makes any sense. If a hobbyist broadcaster wishes to diverge from the “pop 40″ format, her revenues are going to be correspondingly reduced, yet the current model makes absolutely no adjustment for the plight of those who might seek to popularize artists who lack commercial support. These are precisely the webcasters that need to be preserved if we are to maintain the spirit of innovation and free enterprise that have made this country great.

Having said all that, I do acknowledge that without some sort of minumum fee, the music becomes essentially free from the point of view of the copyright holder (or at least, the music companies). Of course, that has always been the case for end users when listening to standard broadcast radio; we can, if we want, record public radio broadcasts and obtain free recordings that way. Yet, webcasters are subject to a more stringent standard where payment is concerned. Does that make sense?

The problem with the minimum-fee notion, of course, arises when you look at more creative and innovative programming models such as Pandora, which provides “custom” radio stations that users design themselves. Paying the $500 minimum per year per station only makes sense if we’re talking about “normal” Internet radio stations that operate on the same basic model of music programming as terrestrial broadcasters.

The current controversy suggests that the music industry has lost a sense of its roots. There was a day when artists and their promoters traversed the country begging deejays to play their songs on the radio. Just getting airtime—artistic exposure—was considered essential to an artist’s career and meant a lot to the label as well. Then, of course, we had the payola scandals, which touched even industry legends such as Dick Clark. All that has changed, obviously, is that now the public has the option of recording music, making individuals less beholden to industry mechanisms and outlets, including Internet radio.

And yes, I do realize that in this case we’re talking about digital media, which theoretically can be recorded with greater fidelity off the Internet. I say theoretically because for simple economic reasons, most free stations don’t broadcast at bit rates above 128 kbps, and even that rate is relatively rare; most broadcasters operate at 64 kbps or below.

This means that capturing digital music via Internet radio is not going to satisfy anyone’s desire for CD quality recordings. (Don’t look now, but recording from a good FM source is a better bet.) And if you’re paying to obtain a better signal (still not generally CD quality, which I personally place at 192 kbps or above) then you’re contributing to a station’s revenues, which inevitably forces that station to pay more to SoundExchange under HR 2060.

I realize that working out all the details of this sort of thing does require some thought and some study. But jumping right in with a truly bad solution doesn’t help anyone. The Copyright Royalty Board’s decision should be rescinded. I honestly believe it is as bad for the music industry—artists and recording labels alike—as it is for the public. I’m not entirely crazy about HR 2060, by the way; but if given a choice between that and the Copyright Board’s version of things, I’ll take HR 2060 as-is any day.

But the truth is, there are potentially far better solutions out there. So buy us some time.

For those of us who have been paying attention, there has been a steady erosion of the rights of individuals in this country when juxtaposed against those of Big Money or large corporations. The current situation of the little guy against the music industry is just another example. I would personally question that there was any need to raise the revenue base the industry enjoyed under the system that exists at this very moment.

But if our representatives stand by and do nothing, that model will be replaced come Monday with an arrangement that will impoverish the choices any of us can enjoy, not to mention silencing thousands of small businesses and hobbyists just to assure that the rich continue to get richer.

Respectfully yours,
Bill Suydam, Editor
Techismo.com