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Small Webcaster Community Initiative
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Commentary
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SoundExchange Stalls As D-Day Looms Nearer
If SoundExchange does not reach a settlement prior to July 15 (and a stay of execution is not granted in that same timeframe), then there are basically no other legal options available to small Webcasters -- or at least nothing even remotely practical.
Our lawmakers are putting complete faith in an organization that could very well be stonewalling: These latest "offers" by SoundExchange are obviously to gain the favor of Congress, thereby forestalling the Internet Radio Equality Act until the deadline date for Congressional intervention passes.
Perhaps SoundExchange is pursuing this tactic because then all Webcasters would be forced to negotiate directly with them. SoundExchange could therefore bypass the statutory license altogether and set its own rates and terms for the use of SoundExchange member works exclusively. These agreements, theoretically, could include "fine print" limitations on royalty distribution to recording artists -- entitling record companies to the biggest piece of the pie. And, of course, SoundExchange would have full authority to decline or even revoke these agreements at any time.
Talk about controlling consumers' access to music diversity online.
I'm usually hesitant to theorize about conspiracies, but the motives of SoundExchange are becoming more and more transparent. I am relieved, however, to see that even Kurt Hanson arrived at many of these same conclusions in his July 9 editorial.
Randall Krause
Executive Director
Small Webcaster Community Initiative
randall@smallwebcaster.org
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Labels, Artists Seek Royalties from Terrestrial Radio
The recording industry recently announced the formation of the musicFIRST Coalition, whose members presently include SoundExchange, RIAA, several industry unions, and over 80 recording artists.
According to a June 14 press conference, the group's primary goal is to institute the legal framework for recording artists and record labels to finally receive public performance royalties from traditional (analog) broadcasting mediums in the United States.
"Of all the ways we listen to music, 'Corporate Radio' is the only medium that refuses to pay performers even a fraction of a penny for their voice and creativity," stated Mark Kadesh, executive director of musicFIRST. "This campaign is about making sure everyone, from up-and-coming artists to our favorites from years-ago, is guaranteed fair treatment when their music is played."
This is one the most misguided statements I've seen published by an RIAA-spokesperson in some time.
How is it "fair treatment" that only terrestrial radio broadcasters should implicate the performance right in sound recordings? Meanwhile dance clubs, skating rinks, mobile DJs, and numerous other businesses — which are built entirely upon the use of recorded music — should remain exempt from compensating SRCOs and recording artists.
If we truly want to level the playing field, then the U.S. should finally adopt a broad public performance right in sound recordings like that of the rest of the industrialized world. Any and all businesses that commercially exploit sound recordings (whether via an analog or digital broadcast audio transmission of a sound recording or via an amplified audio rendition of a sound recording at the location of origin) should necessarily remunerate the creators of those same artistic works.
Seriously, is the U.S. recording industry trying to shoot itself in the foot when they finally have the opportunity to fix the Copyright Act once and for all?
Randall Krause
Executive Director
Small Webcaster Community Initiative
randall@smallwebcaster.org
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SoundExchange Offer Not a Foolproof Solution
For the past several weeks, SoundExchange has been been engaging in private negotiations with Webcasters for royalty rates and terms in lieu of those set by the Copyright Royalty Board on March 2, 2007. However, an extension of the Small Webcaster Settlement Act is also purportedly underway between SoundExchange and a select group of small Webcasters, as represented by attorney David Oxenford, at the behest of two key members of the House committee on Courts, the Internet, and Intellectual Property.
However, these negotiated settlements with SoundExchange may well have unintended legal ramifications. In particular, "blanket" license agreements issued by SoundExchange supposedly only cover the creative works of SoundExchange members. They would not completely relieve small Webcasters of their royalty obligations within the United States for the digital performance right in sound recordings pursuant to the Copyright Act.
Simply put, SoundExchange is only a designated collecting body for statutory licensees. Neither SoundExchange nor Royalty Logic can claim to represent the vast majority of recording artists and record labels -- that is, in the same fashion as ASCAP, BMI, SESAC in the case of musical works. As a result, there is no guarantee that any license agreements dealt by SoundExchange will adequately remunerate non-SoundExchange recording artists and record labels (including members of Royalty Logic) as stipulated by Section 114 and Section 112 of the Copyright Act.
While SoundExchange itself is certainly welcome to extend the rates and terms of the Small Webcaster Settlement Act indefinitely, any such custom license agreements cannot faithfully perform the intended function of the original statutory license unless those same rates and terms are again codified into federal law and published within the Federal Register, (In fact, this was the exact reason that both SoundExchange and the Voice of Webcasters originally persuaded Congress to pass the Small Webcaster Amendments Act of 2002, rather than resorting to separate back-room deals.)
The official Small Webcaster Settlement Act expired December 31, 2005. The fact remains that Congress was responsible for the passage of that originally legislation, and they should ultimately be held accountable for maintaining it. We cannot authorize SoundExchange to meddle with the intellectual property rights of thousands of record labels nationwide by drafting whimsical license agreements without appropriate government oversight. That is not only an injustice to small Webcasters, but it is a slap in the face of thousands of unsigned artists nationwide who must now trust SoundExchange exclusively to look out for their "best interests".
So long as the Copyright Royalty Board determination has been published in the Federal Register (as it was on May 1, 2007), then the Small Webcaster Settlement Act is officially annulled and loses all legal force and effect as a "compulsory license." Let's fix the problem once and for all by continuing to pressure Congress to pass the Internet Radio Equality Act, instead of resorting to dubious patchwork solutions.
Randall Krause
Executive Director
Small Webcaster Community Initiative
randall@smallwebcaster.org
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Congress Comes to Aid of Webcasting Industry
Just as the Internet Radio Equality Act continues to gain substantial bipartisan momentum in the House of Representatives — already with over 60 co-sponsors — a corresponding version of the bill was introduced into the Senate this morning by Ron Wyden (OR) and Sam Brownback (KS).
While mostly analogous to its House counterpart, the Senate bill promises to clarify the rates and terms specific to non-commercial college Webcasters. In addition, a new provision intends to address the refunding of retroactive royalty payments.
Both incarnations of the Internet Radio Equality Act have been referred to the appropriate House and Senate committees for consideration (see below). During the hearing phase, ongoing deliberations will take place — either within full committee, or within an appointed subcommittee — and the proposed legislation will likely undergo significant modifications before being drafted into final form and approved.
\t• House Committee on the Judiciary
\t• House Committee on Energy and Commerce
\t• Senate Committee on the Judiciary
\t• Senate Committee on Energy and Commerce
According to SaveNetRadio Coalition, listeners and broadcasters alike are now encouraged to call on both of their Senators to co-sponsor the Internet Radio Equality Act. Various online tools are made available for site visitors to communicate directly with lawmakers.
\twww.savenetradio.org/
Randall Krause
Executive Director
Small Webcaster Community Initiative
randall@smallwebcaster.org
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How Equitable Is the Internet Radio Equality Act?
I was pleased to see the Internet Radio Equality Act introduced yesterday, particularly on such short notice. The diligence on the part of SaveNetRadio Coalition is highly commendable.
However, I am nonetheless concerned that a percentage of revenue option is again to be instituted (and this time, with no apparent restriction on eligibility). Furthermore, the minimum annual fee is to be substantially reduced for those Webcasters electing the percentage of revenue option. And even more disconcerting, this minimum annual fee is to be set at a predetermined maximum (which does not take into account inflation or other variable economic conditions).
I see very limited rationale for making these radical, short-sighted adjustments (particularly reductions) to the royalty rates and terms that were already in place for small commercial Webcasters prior to the Copyright Royalty Board ruling of March 2, 2007.
If in fact the Small Webcaster Settlement Act served as a precedent while formulating this proposed legislation, then a $2000 minimum annual fee should be reinstated for all small commercial Webcasters that elect the percentage of revenue option. An appropriately set minimum-annual fee will still ensure the survival of all but the most inefficient business models, which makes absolute sense if the streaming media industry is expected to mature and progress with time.
However, these royalty rates and terms set forth in the Internet Radio Equality Act, should be appropriately reflective of past legislation — so long as it can be proven that such legislation lent a significant advantage to the marketplace. And the streaming media industry clearly thrived for several years after the SWSA was enacted in 2002. Therefore, to effectively ignore specific provisions of the SWSA while maintaining others appears to be nothing short of an expedient.
While I can appreciate this attempt to bring royalties from all digital broadcast services into parity, both satellite radio and Internet radio are nonetheless two markedly different mediums. I am not convinced that either one should inherently function as a royalty-setting benchmark for the other.
Allow me to pose the question: How many startup companies are currently operating their own independent satellite radio network in the United States?
Randall Krause
Small Webcaster Community Initiative
randall@smallwebcaster.org
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New Webcaster Bill Promises Royalty Fairness
The Internet Radio Equality Act was introduced into the House yesterday afternoon by Rep. Jay Inslee (Washington) and Rep. Donald Manzullo (Illinois) along with eight cosponsors (the initial projections were between five and ten). Many more cosponsors are likely to come onboard once they start receiving telephone calls from constituents today as well as throughout the coming week.
You can read the full text of the proposed legislation here:
\twww.smallwebcaster.org/media/internetradioequalityact.pdf
The Action Alert message on the SaveNetRadio Coalition homepage has been updated to reflect the next phase of the campaign: Webcasters, listeners, and artists are now encouraged to call their Representatives and ask them to cosponsor H.R. 2060. The site functionality has also changed to include relevant telephone numbers and talking points.
The most notable provisions of this Act, as it applies to small commercial Webcasters, include:
\tA) Nullify the Copyright Royalty Judges' ruling for new rates and terms.
\tB) Establish interim rates and terms for all classes of Webcasters:
\t\t1) Monthly Listenership Fee - At 0.33 cents per aggregate tuning hour.
\t\t2) Percentage of Revenue Fee (Option) - At 7.5% of service revenue.
\t\t3) Minimum Annual Fee - Limited to $500 per service.
\tC) Change the method for determining rates and terms going forward.
The goal of this Act, which was devised by the SaveNetRadio Coalition, will be to bring the royalty rates and terms for Internet radio into parity with those already in place for satellite radio.
Randall Krause
Executive Director
Small Webcaster Community Initiative
randall@smallwebcaster.org
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SoundExchange Awaits Negotiations with Webcasters
In a surprising twist of events, John Simson revealed in a Tuesday press interview that SoundExchange is interested in striking a deal with digital music services for "alternative" royalty rates. However, Mr. Simson also claimed that Webcasters were simply too busy hyping their frustrations, instead of sitting down with SoundExchange and discussing real business solutions.
This is clearly a game of "wits" to the U.S. recording industry. And we've only just reached the third inning. What hardball play can we expect next from SoundExchange?
Randall Krause
Small Webcaster Community Initiative
randall@smallwebcaster.org
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Copyright Royalty Judges Deny Rehearing
The Copyright Royalty Judges today summarily dismissed all motions for rehearing and reconsideration submitted by various participating parties earlier this month, including those of DiMA, NPR, and even SoundExchange.
This is truly impeccable timing. Kurt Hanson is holding his annual industry summit today in Las Vegas, SaveNetRadio coalition launched its new mass-media campaign today, and Small Webcaster Community Initiative announced its intent to form a U.S. trade association today.
Read the response of the Copyright Royalty Judges in its entirety:
www.smallwebcaster.org/media/crb_responsetomotions.pdf
There is still the possibility of an appeal by NPR, DiMA, et al. However, I am placing my bets on Congressional intervention. That's our best hope at this juncture.
It appears that Monday, April 16 is truly one for the history books.
Randall Krause
Executive Director
Small Webcaster Community Initiative
randall@smallwebcaster.org
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SoundExchange Responds to Motions for Rehearing
On Monday, April 2, National Public Radio (NPR) submitted a memorandum requesting the Copyright Royalty Judges grant their prior motion for a rehearing. This comes at an opportune time since crucial testimony and arguments have recently become available from various participating Webcasters.
However, SoundExchange was equally quick to defend its position -- declining the need for a rehearing. Executive director John Simson essentially argues that this all comes down to unfair gameplay. The royalty rates and terms set by the Copyright Royalty Judges on Friday, March 2 were justified and in no need of further deliberation.
This is not a surprising move on the part of SoundExchange. Mr. Simson realizes that the Webcasters still have valid testimony to bring to the table -- information that could further substantiate the Webcasters' case, and quite likely refute some of the claims previously made by a supposedly credible witness of SoundExchange.
Record artists and sound-recording copyright holders certainly deserve adequate and just compensation for their artistic labour. However, any determination of "adequate and just compensation" is ultimately at the behest of the Copyright Royalty Judges, not SoundExchange.
In the United States judicial system (a royalty rate hearing is certainly a tribunal in its own right), the person or persons sitting at the bench do not owe a fiduciary responsibility to any one party during a legal proceeding. In other words, a fair and impartial judgment must be handed down provided any admissible evidence and arguments submitted for consideration on behalf of all parties involved.
Now, if SoundExchange does not wish to acknowledge such commonplace rules of "legal gameplay," then they should rightfully withdraw from the entirety of these proceedings here and now.
Randall Krause
Executive Director
Small Webcaster Community Initiative
randall@smallwebcaster.org
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How the Royalty Rate Rulings Went Awry
There have been some promising new developments thus far in the Copyright Royalty Board frenzy. Several parties have filed motions for rehearing, including both DiMA and ClearChannel. However, the small commercial Webcasters are once again vying for a revenue-based royalty rate.
I believe that the Copyright Royalty Judges dismissed that proposal with good reason during the prior proceeding. For smaller companies, a rate schedule that takes both ATH and revenue into consideration is both more favourable and economically feasible than one based squarely upon revenue or "spins"[1].
The primary shortcoming of the Small Webcaster Settlement Act is that it permitted digital music services to exploit sound-recordings to an exceptional (and arguably excessive) degree — yet failed to recognize the intrinsic "value" being derived from such unrestrained use of these creative works. In short, revenue is not reflective of the magnitude of the performances taking place. It has the potential, if not properly formulated from the unique circumstances of each Webcaster, to actually deprive recording artists and record producers from just compensation for their artistic labour.
While I think that the SWSA was an effective stopgap solution for the newly emerging online music marketplace in 2002, those historic royalty rates and terms should rightfully have no bearing within the current phase of litigation.
However, with that said, the setting of new rates and terms should necessarily take the best interests of the public into account. That is why I object to the Copyright Royalty Board as an "institution" for this purpose. Failing to provide a reasonable means for digital music services to transition to the newly established license fees (whether through a "grace period" or "tiered fee schedule", or some form of alternative relief) effectively tips the balance of power completely in favor of copyright holders — which is contrary to the intent of U.S. copyright law.
Even more importantly, eradicating an entire segment of the streaming media industry, and doing so indiscriminately, certainly does not serve the public good either.
[1] Digital Media Association is continuing to push for royalty rates based solely on listenership, or ATH.
Randall Krause
Executive Director
Small Webcaster Community Initiative
randall@smallwebcaster.org
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