Small Webcaster Community Initiative - Promoting and Protecting Independent Online Music Radio


Commentary pertaining to ongoing new developments in digital copyright law is published below.

Published by Leslie Krause on Wednesday, July 11, 2007  [Permalink] [Return to Top]

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.

Leslie Krause
Executive Director
Small Webcaster Community Initiative

Published by Leslie Krause on Saturday, June 16, 2007  [Permalink] [Return to Top]

Labels, Artists Seek Royalties from Terrestrial Radio

Recording Industry Forms Coalition to Impose 'Performance Tax'

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?

Leslie Krause
Executive Director
Small Webcaster Community Initiative

Published by Leslie Krause on Friday, May 25, 2007  [Permalink] [Return to Top]

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.

Leslie Krause
Executive Director
Small Webcaster Community Initiative

Published by Leslie Krause on Thursday, May 10, 2007  [Permalink] [Return to Top]

Congress Comes to Aid of Webcasting Industry

Sens. Wyden and Brownback Sponsor Bill to Save Internet Radio

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.

        • House Committee on the Judiciary
        • House Committee on Energy and Commerce
        • Senate Committee on the Judiciary
        • 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.

Leslie Krause
Executive Director
Small Webcaster Community Initiative

Published by Leslie Krause on Friday, April 27, 2007  [Permalink] [Return to Top]

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?

Leslie Krause
Small Webcaster Community Initiative

Published by Leslie Krause on Thursday, April 26, 2007  [Permalink] [Return to Top]

New Webcaster Bill Promises Royalty Fairness

Reps Inslee and Manzulla Launch Internet Radio Equality Act

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:

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:

        A) Nullify the Copyright Royalty Judges' ruling for new rates and terms.
        B) Establish interim rates and terms for all classes of Webcasters:
                1) Monthly Listenership Fee - At 0.33 cents per aggregate tuning hour.
                2) Percentage of Revenue Fee (Option) - At 7.5% of service revenue.
                3) Minimum Annual Fee - Limited to $500 per service.
        C) 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.

Leslie Krause
Executive Director
Small Webcaster Community Initiative

Published by Leslie Krause on Wednesday, April 18, 2007  [Permalink] [Return to Top]

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?

Leslie Krause
Small Webcaster Community Initiative

Published by Leslie Krause on Monday, April 16, 2007  [Permalink] [Return to Top]

Copyright Royalty Judges Deny Rehearing

Refusal to Grant New Testimony Signals End of Internet Radio

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:

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.

Leslie Krause
Executive Director
Small Webcaster Community Initiative

Published by Leslie Krause on Monday, April 2, 2007  [Permalink] [Return to Top]

SoundExchange Responds to Motions for Rehearing

Rules of gamplay have not not changed, only the strategies used

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.

Leslie Krause
Executive Director
Small Webcaster Community Initiative

Published by Leslie Krause on Tuesday, March 20, 2007  [Permalink] [Return to Top]

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.

Leslie Krause
Executive Director
Small Webcaster Community Initiative

Published by Leslie Krause on Friday, March 16, 2007  [Permalink] [Return to Top]

Blanket Licensing: Music Clearance for the Digital Age

According to inside sources, Mary Beth Peters, former Register of Copyrights, is to testify at the House Judiciary Committee hearing on March 22. Her primary focus will be on reformation of the Section 115 license. However, she may have the opportunity to address some of the related pitfalls currently facing non-interactive Webcasters under the Section 114 license.

As an extension to Ms. Peters existing proposals for copyright modernization, I would welcome a comprehensive "blanket licensing" scheme for all digital music services — thereby abrogating the problematic copulsory license once and for all. Perhaps this approach bespeaks broader modernization of the Copyright Act, but in any respect, I believe that a more efficient and more economical means must be devised for digital music services to clear these necessary performance and master-use rights in sound-recordings (including any related rights in the musical-compositions embodied therein).

Commercial Webcasters should be fully equipped to meet the growing demands of the typical "online music consumer" and effectively compete in what is truly a prolific marketplace where illicit digital music services are undoubtedly becoming more and more predominant. For this reason, collective licensing within the free-market should be adopted as a replacement for the more cumbersome regulatory approach. This would promote increased competition in the arena of digital broadcast licensing, and would greatly streamline the overall rights acquisition process.

In addition, SoundExchange and Royalty Logic should ultimately assume the role of "recording rights societies", authorized on behalf of sound-recording copyright owners to execute these one-stop shop license agreements to digital music-services for the performance and reproduction of any sound-recordings within their respective repertories, and to administer the royalties from such performances and reproductions to the recording artists and record producers accordingly (as those rates and terms are nominally formulated).

Leslie Krause
Executive Director
Small Webcaster Community Initiative

Published by Leslie Krause on Thursday, March 8, 2007  [Permalink] [Return to Top]

News Outlets Latch onto Radio Royalties Frenzy

Our voices have finally been heard! The cause has been picked up by the mainstream press nationwide — and even abroad. Here are some examples of the coverage we've received:

Business Week -
Chicago Tribune -
Los Angeles Times -

Everybody has put forth an extraordinary amount of effort this past week to ensure the survival of independent online radio. Your generous albeit painstaking contributions will certainly not go unnoticed nor unrewarded. Thank you.

Leslie Krause
Small Webcaster Community Initiative

Published by Leslie Krause on Wednesday, March 7, 2007  [Permalink] [Return to Top]

Daylight Saving Time Goes Into Effect March 11

Don't forget that on Sunday at 2:00 AM, clocks in the United States shift forward one hour as part of the Energy Policy Act of 2005 (meaning one hour is lost). You should manually coordinate these date adjustments across any broadcast servers that are not already "patched" or on Greenwhich Mean Time.

Leslie Krause
Small Webcaster Community Initiative

Published by Leslie Krause on Tuesday, March 6, 2007  [Permalink] [Return to Top]

Pay-Per-Play Rates Wrongly Absent from SWSA

It has been put forth by members of the Webcaster community that the termination of the Small Webcaster Settlement Act of 2002 was unjustified and that a revenue-based royalty rate is the only reasonable alternative for small commercial Webcasters whom do not have the economic means to justify royalty payments based upon individual performances of sound recordings.

Similar testimony by Kurt Hanson, favouring an exclusive revenue-based royalty rate -- however with very limited evidence and justification provided for his claims -- appears in the Copyright Royalty Board decision, published March 6, 2007.

However, there are two critical factors that need to be considered with respect to the CRB ruling, in particular the lack of a revenue-based royalty rate:

1) The language present in the Small Webcaster Settlement Act makes it inadmissable as evidence during any future proceedings by the Copyright Royalty Judges for the setting of or adjustment of rates and terms for Webcasters.

2) The revenue-based model alone, while more feasible for small commercial Webcasters, does not provide appropriate remunerations to recording artists and record producers for the actual exploitation of the sound-recordings.

In effect, the Small Webcaster Settlement Act of 2002 enabled smaller Webcasters to "freely" exploit sound recordings in their Webcast programming with absolutely no regard for the scale of the performances taking place. Therefore, it is my assertion that the Act itself was at least partially flawed and should have at least included a limitation on the intensity of usage[1] by Webcasters for eligibility under the statutory amendment.

[1] The scope of this limitation could extend to "plays", "aggregate tuning hours", or any other industry standard metric.

Leslie Krause
Executive Director
Small Webcaster Community Initiative

Published by Leslie Krause on Tuesday, March 6, 2007  [Permalink] [Return to Top]

Determination of CRB Released to Public

The final ruling of the Copyright Royalty Board, including the newly established rates and terms, have been officially published on the Copyright Office site:

Any party involved in the proceeding can request a rehearing within 15 days of this determination.

Leslie Krause
Small Webcaster Community Initiative

Published by Leslie Krause on Monday, March 5, 2007  [Permalink] [Return to Top]

Retraction of Royalty Rates Is Unlikely

There appears to be a misconception circulating the Internet that through sufficient lobbying efforts on Capitol Hill, the 2006-2010 royalty rates can somehow be repealed.

While the intention is certainly admirable, this level of judiciary influence is next to impossible. The outcome of a legal proceeding cannot be annulled by Congress (unless it is proved to be counter to some legal statute or precedent). And even then, some separate litigation would be required.

The appellate court may be able to partially reverse the previous determination or at least forestall any new decisions in light of other evidence. Additionally, the parties involved could reach a settlement. But this is ultimately a closed tribunal not an open forum. There is virtually no public input accepted during the remainder of this case. Once the final ruling is made, and the rates are published in the Federal Register, then they will become official.

The best course of political action is to encourage lawmakers to provide a mechanism under statute by which Webcasters could again pursue negotiations with SoundExchange for separate royalty rates during the present term.

Leslie Krause
Small Webcaster Community Initiative

Published by Leslie Krause on Sunday, March 4, 2007  [Permalink] [Return to Top]

The Urgency for Comprehensive DMCA Reform

The DMCA is in dire need of reform. Lawmakers need to recognize that the Act has numerous technical deficiencies and contradictions which create unnecessary burdens for Webcasters. And these corrections must occur before "raising the roof" on royalty rates for Webcasters.

The following are just a couple of examples of activities that are commonplace to Webcasting that finally need to be properly codified.

• Legally you cannot mix, crossfade, or even voiceover the music within a Webcast because doing so violates the adaptation right in the sound-recording.

• Legally you cannot syndicate a music program across multiple Webcasts because that is a violation of the reproduction right and the distribution right in the sound-recording.

Of course the greatest shortcoming of the statutory Webcaster license, is that all transmissions are limited to the United States. It is imperative that SoundExchange finally renews its IFPI International Webcaster Agreement. We are one of the few remaining first-world nations that still does not recognize the global scope of Internet radio. Australia, Germany, France, Mexico, the United Kingdom, and numerous other countries are already onboard with the program. Where is the United States?

Furthmore, SoundExchange does not even bother to police Webcasters for compliance. Apparently they feel their only purpose is to be a designated collecting body -- not a performing-rights society. After all, the latter would suggest that the intent of SoundExchange is to protect the interests of its member collective a la ASCAP, BMI, and SESAC. Meanwhile, the pirate Webcasting community will thrive during this latest rate-surge with few (if any) grievances. As for the majority of legitimate online radio stations, they will be forced into oblivion.

For these and other reasons, I can say with great confidence that these higher royalty rates are not justified for our industry.

Leslie Krause
Small Webcaster Community Initiative

Published by Leslie Krause on Saturday, March 3, 2007  [Permalink] [Return to Top]

What Will You Do When the Internet Airwaves Go Silent?

Dear Industry Colleagues:

As you may have heard, there are some significant legal developments occuring in the Webcaster industry that could directly impact you and your favourite online radio stations -- including the highly-anticipated announcement of new 2006-2010 statutory royalty rates by the Copyright Royalty Board and the untimely termination of the Small Webcaster Settlement Act of 2002.

This, in addition to several other obstacles facing our community (including the PERFORM Act of 2007), could spell certain doom for hundreds if not thousands of Webcasters nationwide over the course of the coming months. Even unsigned bands and independent labels, many of which rely on Internet radio airplay, will feel a dramatic ripple-effect once their sponsoring stations are forced off the air.

You can still save Web radio!

We'll really be counting on the support of broadcasters and listeners such as yourself to help to spread the word about our ongoing campaign efforts. It is particularly crucial that lawmakers be informed of the growing economic challenges now facing the streaming radio industry. Please contact your senators and representatives in Congress and stress the need for immediate relief from the CRB decision of March 2.

Our community needs on your support.

While this misguided ruling may be able to silence our streams, they can never silence the voice of the people. Show the world just how much you appreciate independent online music radio, by adding us to your top friends list or by placing our official Flash banner on your blog or journal homepage.

It's not too late to make our voices heard.

As a mostly grassroots coalition, we've still got a long road ahead of us. However, by remaining steadfast we can effect positive change for the community. Please keep checking our homepage for the latest action alerts.

Leslie Krause
Executive Director
Small Webcaster Community Initiative

Published by Leslie Krause on Saturday, March 3, 2007  [Permalink] [Return to Top]

2006-2010 Royalty Rates Announced by CRB

New Retroactive Fees Could Silence Many Small Webcasters

The new compulsory license fees for U.S. Webcasters were announced on Friday, March 2. As expected, all arguments put forth by Webcasters were rejected outright by the Copyright Royalty Board.

A panel of industry representatives including DiMA had requested lower royalty rates -- on par with those owed under statute to the songwriter and music publisher societies such as BMI and ASCAP. In addition, they emphasized that higher royalties would not only impose an unrealistic barrier to entry for new Webcasters but that the economic consequences could prove harmful if not fatal for the still nascent Webcaster industry. However, the copyright royalty judges disagreed with each of these assertions and, in a 100-page long ruling, opted instead for significantly higher rates as recommended by SoundExchange.

Unlike the Small Webcaster Settlement Act of 2002 which provided reasonable license fees for eligible small commercial Webcasters based on a percentage of revenue, the new rate schedule set forth by the Copyright Royalty Board did not take into account any provisions of the Small Webcaster Settlement Act (which expired December 31, 2005). All Webcasters -- with only limited consideration for commercial status and operational scale -- must now pay exorbitant fees based on every individual performance of music. Even worse, these rates apply retroactive to January 1, 2006.

To gain some perspective on this issue, below is the newly mandated fee structure which applies to all non-interactive Webcasters:

Annual Minimum License Fee [1]:
$500 per channel (2006-2010)

Performance License Fee [2]:
$0.0008 per-performance (2006)
$0.0011 per-performance (2007)
$0.0014 per-performance (2008)
$0.0018 per-performance (2009)
$0.0019 per-performance (2010)

[1] There exists no definition of what constitutes a "channel" or "station"
[2] The ephemeral license fee is included in the performance license fee

Note that the scope of this latest decision is strictly limited to Internet transmissions, and would conveniently exclude all other digital mediums such as satellite radio, HD radio, and cable which pay separate royalties.

For an average small-commercial Webcaster, the 0.08 cent per-performance fee alone equates to well over 110% of gross revenues. That is, even before deducting all other operating expenses, including fees owed to ASCAP, BMI, and SESAC, a typical station would pay upwards of $450 per month to SoundExchange alone. That is almost a triple-fold increase overnight! Then, factor in the $500 per-channel minimums for such multi-channel services as SomaFM, Live365, and Mercora and it clearly becomes too burdensom for even the most "efficient" Webcasters to absorb these outrageous fees.

In essence, no Webcaster can possible stay afloat more than a few weeks (if not mere days) following the Copyright Royalty Board decision. In the worst case scenario, should this ruling be allowed to stand without appeal, it will sound the death knell for a significant portion of the online radio community. Hundreds if not thousands of your favourite music streams will suddenly disappear completely from the Internet airwaves.

Leslie Krause
Executive Director
Small Webcaster Community Initiative

Published by Leslie Krause on Monday, February 12, 2007  [Permalink] [Return to Top]

Worldwide Webcaster License Still Ends at SoundExchange

Many Webcasters today recognize the value of streaming their content globally. However, based on a recent press release concerning Phonographic Performance Limited (PPL), it appears the UK performing rights organization claims they can now provide this much needed "multi-territorial" clearance to Webcasters -- even with respect to the United States. And apparently the first such worldwide license has already been executed.

To get some clarification on this matter and its validity, I spoke with Kyle Funn, licensing representative for SoundExchange. He confirmed that while PPL may be signed to the IFPI International Webcaster Agreement, they are not in the position to administer licensing for the online transmission of sound-recordings into the United States. For this purpose, he informed me that one must also secure a separate agreement through SoundExchange. To reiterate, there is currently not a "one-stop" license available that includes the United States. Any claims to the contrary, are quite likely fallacious.

Leslie Krause
Small Webcaster Community Initiative

Published by Leslie Krause on Monday, January 29, 2007  [Permalink] [Return to Top]

Actions Speak Louder than Words

How the Recording Industry Offers Its Consolation to Webcasters

I recently came across the following statements from a 2002 press release on the RIAA Website. Granted, this opinion of small Webcasters may have changed somewhat since that time. However, for all of the proclaimed merits of the small Webcaster community, the recording industry never justifies its exorbitant royalty rates with any real foresight into the economic consequences for small Webcasters. Certainly the RIAA's intent may have been to pacify nay-sayers, but this type of questionable propaganda will not go unnoticed forever.

The Myths & Facts: Internet Radio Fairness Act (Sept 27, 2002):

"Myth: The major record labels and the RIAA don't support the nascent webcasting industry and want small webcasters to pay royalty rates that are so high that no small webcaster will be able to stay in business.

"Fact: The major record labels and recording artists want 'small' webcasters to succeed. At a time when enormous consolidation is occurring in the traditional radio industry, the diversity of music choices provided by webcasters is great for consumers and artists."

Perhaps it is time for a followup press release, "The Ironies and Mistruths of the RIAA."

Leslie Krause
Small Webcaster Community Initiative

Published by Leslie Krause on Friday, January 19, 2007  [Permalink] [Return to Top]

The PERFORM Act Makes a Repeat Performance

The infamous PERFORM Act, originally shelved in committee last year, has been revived, this time as Senate bill S.256.

The limitations it will impose on both satellite and Web radio are no more benign than the Act's previous incarnation. In fact, the small Webcaster community would likely be cripped by the technological limitations alone. Not surprisingly, the RIAA is backing the PERFORM Act. Why else would Congress take such an atrocity of legislation so seriously? And so once again consumers' fair-use rights are in jeopardy.

Rest assured, I will post a fully commentary on this issue once I have the time.

Leslie Krause
Small Webcaster Community Initiative

Published by Leslie Krause on Sunday, January 7, 2007  [Permalink] [Return to Top]

New U.S. Webcasting Rates Could Spell End

The Future or Fate of Independent Online Radio Rests in Judges' Hands

Official proceedings to determine the new license fees for U.S.-based Webcasters retroactive to January 2006 are drawing to a close. The trial-phase was completed this past November, and deliberations were held on December 21. It is now up to the Copyright Royalty Judges to evaluate the testimony submitted by all parties involved and enact a new statutory rate by March 4, 2007.

SoundExchange has urged that the license fees be raised to 30% of gross revenues or 0.08 to 0.19 cents per-track per-listener, whichever is higher. (This, of course, is in addition to the revenue-based fees already imposed by ASCAP, BMI, and SESAC for use of their repertory of musical works.)

Other participating industry groups -- including such major players as AOL, Yahoo!, NPR, and AccuRadio, and Digitally Imported -- argued that the rates were already excessive given the current marketplace conditions. Any increase would create an unrealistic barrier-to-entry.

At present, eligible online music stations that elect the Small Webcaster Settlement Act pay a license fee corresponding to 10% or 12% of revenues or 7% of operating expenses. In other words, SoundExchange is proposing a triple-fold increase in the statutory rate, and one that would apply to all Webcasters regardless of commercial or non-commercial status.

There is a good likelihood that the revenue-based model now afforded by the SWSA will become obsolete. Individual broadcasters (in particular, those generating less than $50,000 per year) will no longer be provided immunity from the standard performance-based license fees endured by large commercial broadcasters. This could spell disaster for many.

The recording industry contests that stream-ripping alone imposes an unbearable economic risk, and therefore higher royalties are a necessity to compensate sound-recording copyright owners for potential losses in CD and MP3 sales. This ongoing sense of paranoia is particularly evident given that the recording industry perceives Webcasting to have very little to no promotional benefit to performing artists.

Will March 4, 2007 spell the end for independent online radio?

Leslie E. Krause
Executive Director
Small Webcaster Community Initiative

Published by Leslie Krause on Tuesday, January 2, 2007  [Permalink] [Return to Top]

Australian Copyright Law Permits Space, Time-Shifting

A Landmark Achievement for Fair-Use Advocates, Maintains Shortcomings

A new Australian bill went into full-effect on January 1 of this year, which specifically allows Australian consumers who have purchased music on any recorded medium to re-record the same music onto another medium or device for convenience of private use -- that is, "space-shifting". Thus far, from what information I can find, "time-shifting" of Australian television and radio broadcasts is now permitted as well, but the legal ramifications with respect to Internet radio are still rather vague.

Personally, I am very disappointed by this new legislation. On the surface these provisions seem like great news since they expand the rights of music-users. But once again -- they also carry some remarkable limitations:

If the media on which the songs were originally recorded is protected in any way (for example, a copy-protected CD or a DRM-encoded multimedia file), then you still have the right to re-record it onto a different medium. But that right is suddenly usurped if you attempt in any way to defeat the protection measures in the recording. In other words, you have the freedom to legally backup your music collection, yet you can't backup your music collection because the sound-recording prevents you from doing so. Similar restrictions could, in theory, even preclude home-recording of HDTV, HD Radio, Sirius Radio, and XM Radio programs on receivers that honour specially-mandated broadcast flags. Hence, the very law that is designed to provide you freedoms is trumped by the other law that was intended to preemptively take away your freedoms.

The APRA discusses the issue in greater depth on their Website. They actually proposed levying a low-cost license fee (most likely upon the consumers themselves rather than the vendors of audio recording devices, as is done in the United States) to allow music-users to legally transfer their music-collection from one medium to another.

This is yet another example of how the recording-industry continues to seize the fundamental fair-use rights of legitimate music consumers, all for their own commercial advantage.

Leslie E. Krause
Executive Director
Small Webcaster Community Initiative

Published by Leslie Krause on Wednesday, May 24, 2006  [Permalink] [Return to Top]

PERFORM Act Aims to Ban MP3 Streaming

There are many inherent flaws with the recently proposed PERFORM Act. Let us take the most obvious few, keeping in mind that there is no prohibition of streaming MP3 audio itself nor even a mandate to use any specific DRM technologies in this legislation.

First, I can't imagine the government endorsing what are all highly proprietary, commercialized technologies: Streaming DRM is currently only widely available as part of the "closed" Windows Media Audio and "closed" Real Audio formats -- both of which require a Microsoft Windows Media server or Real Media server.

Third, it is neither technologically nor economically feasible for hundreds of thousands of small Webcasters to switch to a proprietary format like Windows Media or Real Audio just to implement copy protection within their Webcasts. This would require MP3 Webcasters to re-encode entire libraries of music, which equates to millions upon millions of audio tracks. (To forego this step would introduce generational loss inherent in conversion from one compression format to another -- which defeats the purpose of switching to a supposedly "higher quality" Windows Media Audio or Real Audio formats in the first place).

Fourth, streaming MP3 is a universally accessible streaming media format, supported in virtually every popular desktop media player today -- even Internet radio friendly receivers. However a switch-over to DRM would force millions of listeners to download and install the latest version of Real Player and Windows Media Player or to purchase a device with a Windows Media Audio or Real Audio decoder chip just to listen to Internet Radio -- which only furthers Microsoft and Real's agenda at dominating the streaming media marketplace while reaping great rewards through expanded licensing of their proprietary compression technologies.

This scenario continues to look bleak: The Internet radio broadcasters will suffer. The Internet radio listeners will suffer. The Internet radio device manufacturers will suffer. The Internet radio application developers will suffer. Yet, ironically, both Microsoft and Real will prevail.

And all the while the recording industry continues to crack down on digital broadcasts, the 25-year old red-book CD standard remains entirely untainted by any clause in the Copyright Act stipulating digital content protection. Is CD-DA an open-standard, or is it perhaps becoming a double standard as well?

Perhaps the recording industry is not yet up with the times. Perhaps they don't see it fit to embrace a format that they know full well would increase their own costs of production -- but they don't mind increasing the costs of production of those who use their material. Perhaps it just makes better sense to restrict anything which the recording industry does not have direct and complete control so that they can maintain their anti-competitive advantage.

HD radio is taking a step forward while Internet radio is again taking another step back. It is just a matter of time before MP3 audio itself is outlawed and the fair-use rights of consumers are rendered obsolete.

I'd give it, say, two more years. Rest in peace.

Leslie E. Krause
Executive Director
Small Webcaster Community Initiative

Published by Leslie Krause on Wednesday, July 13, 2005  [Permalink] [Return to Top]

Re-Examining the Legal Implications of Podcasting

(The following editorial was published in the WinAmp discussion forums on July 13, 2005)

Public performance and public display are well defined in copyright law, and it can be seen that neither of these exclusive rights encompases Podcasting. ASCAP has recently removed the term "pod-casting" from its experimental license agreements, quite likely for this very reason.

The specific language of the terms of the ASCAP Experimental License Agreements (interactive 5.0 and non-interactive 2.0) deny the licensee from enabling or incurring or even granting the making of reproductions and downloads of musical works onto a hard drive or other media device through the same service which thus specifically disqualifies a Podcast.

Podcasting unambiguously involves a reproduction of a musical work and of a sound recording. Neither of these rights (including the master use rights of the recorded work) are under the control nor the jurisdiction of ASCAP and BMI (notwithstanding the fact that ASCAP and BMI have nonetheless adopted the position that digital downloads are a public performance).

Furthermore, there is hitherto no case law or binding legal doctrine which can assert or otherwise refute that digital downloads from a public server do exploit music copyrights in the fashion of a public performance.

In examination of "Section 104 Report on the Digital Millennium Copyright Act" (Issued by the U.S. Copyright Office on August 29, 2001)

"Though we recognize that it is an unsettled point of law that is subject to debate, we do not endorse the proposition that a digital download constitutes a public performance even when no contemporaneous performance takes place. If a court were to find that such a download can be considered a public performance within the language of the Copyright Act, we believe that the arguments concerning fair use and the making of buffer copies are applicable to this performance issue as well. It is our view that no liability should result from a technical "performance" that takes place in the course of a download."

The Report by the Copyright Office enforces the position that any performance in the manner of a music download is purely incidental to the music download, and the performance thereof is as of yet not a statutory provision.

While it is true that the Webcasting provisions of the DMCA describe transmissions from a non-subscription Internet service to be received by the public, there is absolutely no allowance for the undertaking of any reproduction of a sound recording by the recipient (other then consequential ephemeral phonorecord copies as referenced therein) in order to necessarily accomplish the performance. Nonetheless, this is how a Podcast is specifically designed to operate. The Podcast, by virtue of its operation if applied to the statutory definition of a Webcast, is prohibited.

In conclusion,

One should be ever mindful -- not ever trustful -- of what an attorney says. An attorney may provide you with useful information, but his lack of experience or failure to exercise due diligence doesn't absolve you of your obligations under copyright law. The infringement and the ensuing liability still applies, it simply means you have someone to argue in your favor and hopefully that will at least delay or lessen the consequences.

Leslie E. Krause
Executive Director
Small Webcaster Community Initiative

Published by Leslie Krause on Sunday, June 5, 2005  [Permalink] [Return to Top]

Stream-Ripping May Still Be Protected Under Fair-Use

(The following editorial first was published in the June 5, 2005 issue of RAIN.)

Is recording Internet radio broadcasts a non-infringing use of the copyrighted works therein? This appears to be the new conundrum of U.S. copyright law.

It's hard to dispute the long sacred practice of "time shifting broadcast programming" as evidenced by the Sony Betamax case (which permitted recording a television show for later home viewing on the grounds that the transmission was made available under license to the public). And the subsequent decision by the Supreme Court in the Diamond Rio case to uphold space-shifting (transferring recordings through a computer hard drive onto a portable digital media device) only further ratified the consumer's right to copy purchased music recordings for personal, noncommercial purposes from one medium directly onto another.

But do these same fair use doctrines still apply in a day-and-age of all digital media in which the recording industry has a greater stake? And what are the exact implications of archiving time-shifted programs and otherwise modifying them (including breaking them into individual segments) for later viewing?

Unfortunately, the jury is still out when it comes to these issues, in particular their implications with respect to the Digital Millennium Copyright Act. The DMCA already has provisions restricting digital broadcast services on the Internet from facilitating the recording of their own transmissions by end-users. However, it is important to note that these prohibitions do not to apply to computer software products independent of the same Webcasting service, even if such applications (and the end-users themselves) purposefully enable the recordings to be made -- with the specific exception that they do not circumvent copy control measures and that they do not engage in otherwise contributory infringement with regards to the copyrighted works.

Perhaps the Audio Home Recording Act, if properly amended, could prove to be the ideal solution to this and other copyright concerns that now plague consumers. By adapting the AHRA to effectively tax the makers of computer-based digital audio recording software and hardware -- rather than consistently thwarting end-users themselves from making personal, noncommercial use of music to which they have fair use rights -- then it would be possible to achieve a more satisfactory balance between the rights of copyright holders and consumers. Such an amendment would not only serve to better justify time-shifting and space-shifting practices in light of the DMCA, it would help to further (rather than stifle) technological innovation while also providing for adequate compensation through royalties to the music industry in exchange for waiving claims of copyright infringement against consumers for the use of such new media technologies.

Leslie E. Krause
Executive Director
Small Webcaster Community Initiative

Published by Leslie Krause on Monday, May 9, 2005  [Permalink] [Return to Top]

Does Podcasting Constitute a Public Performance?

(The following editorial was published in the May 9, 2005 issue of RAIN.)

I am in agreement that podcasting goes well beyond the traditional public performance, even in the 'interactive' sense. Perhaps a misnomer, 'podcasting' involves the digital-mechanical reproduction and delivery of a musical work onto a portable storage device. It should therefore not be considered the jurisdiction (or responsibility) of ASCAP and BMI to exercise licensing that does not involve protecting public performance rights.

However, it is also not entirely correct to state that the right to distribute music compositions in a podcast absolutely necessitates a compulsory license in which and every principal copyright owner (e.g. music publisher) must be identified and notified. The NMPA's licensing affiliate, The Harry Fox Agency, offers a convenient New Media License for this exact purpose.

The Copyright Act, Section 115, sets forth statutory terms and rates for the making of 'digital phonorecord deliveries,' or DPDs. However, ironic as it may seem, one must still procure separate Master Recording Licenses in order to even redistribute the existing sound recordings on which these respective music compositions are embodied.

Indeed, the recording industry appears to be yet again one-step-behind when it comes to enabling the evolution of radical new music technologies and services like podcasts.

Leslie E. Krause
Executive Director
Small Webcaster Community Initiative

Subscribe to our feed