The Death of Web Radio?

Posted by: Olga Kharif on April 16, 2007

On April 16, right in the midst of the NAB2007 broadcasters conference, the Copyright Royalty Board upheld its earlier decision to impose higher royalty rates on Web radio stations. The stations will have to cough up these royalty payments – 300% to 1,200% higher than the fees they are used to paying — retroactively. Unless Congress gets involved, that will mean the death of many Web radio stations, whose revenues will fall short of these royalty payments.

But larger companies not currently thought of as broadcasters will suffer as well: Today, the CRB clarified that its decision applies not only to Web-based radio stations, but also to any company broadcasting music over cellular networks. That means that its decision can be applied very broadly. In effect, the CRB has imposed high royalties, payable to a company formed by music labels, on everyone from Mercora, which allows users to download its radio-playing software onto smartphones for listening to Webcasts via cellular, to music services powered by wireless carriers themselves. Until now, these carriers have negotiated for royalty rates with individual content owners directly. These business arrangements have not been disclosed, but there is a chance that the telcos’ payments will now increase.

Now that the CRB decision affects not just the little guys – Webcasters – but also some of the telecom world’s giants, that makes me more sure than ever that Congress will have to get involved before the decision goes into effect May 15. Remember, Congress got involved in figuring out what fair and reasonable rates were the last time the royalty rates were renegotiated. Now, there are enough small and large Webcasters out there – wireless and Web-based — to claim legislators’ attention. Already, today, a number of broadcasters kicked off SaveNetRadio.org grassroots campaign. I wouldn’t be surprised if telcos join in this effort.

Reader Comments

mark

April 17, 2007 2:48 AM

maybe web radio should just give up on the major labels. there is so much good recorded music in the world that is not on a major label, why should we continue to pander to the suits that push the garbage that they do? the time of the big record company is over and they just don't get it. stop being an end-cap shopper. look around you. there is plenty of good art happening all around you that you could support.

oh, i almost forgot, most of you think of artists as some sort of servant rather than a worker who persists in creating works through toil.

emceay

April 17, 2007 2:55 AM

The industry would have an easier time pulling the wool over people's eyes if they didn't get greedy with stipulations like retroactive royalties.

morris

April 17, 2007 8:18 AM

Leave it to these people to legislate something to death. Why do they feel the need to kill something in the name of preservation? Answer: greed. I don't listen to internet radio much, and it appears I'll be listening even less. Thanks a lot, fellas...

Ed

April 17, 2007 9:53 AM

I definitely agree with the comment about ditching the major labels. However, I will point out that the major labels are peforming a service that I don't see being done elsewhere - the small labels don't appear to turn anyone down due to their work not yet being good enough, and the fully independant have no review whatsoever.

I grant that the major labels aren't flawless - probably over 90% of what they pass fairs very poorly on the market. However, writing music takes a lot of skill and practice - my first attempt at composing was so horrid that I never made a second. I have heard independants that sounded almost as bad as that first attempt. The good ones *are* out there - but there's so many bad ones, it's tough to find the good ones.

I personally think it would be awesome if a group of people would get together in an organized manner and produce lists of what they think the good stuff is. Note that I'm not talking about people simply publishing their playlists - showing the world everything at least one member of the group likes. I'm talking about something a bit more selective - listing only those things that a majority of the group likes.

There could be an organization out there which is doing that already - but I haven't seen it.

Tim Wesson

April 17, 2007 10:08 AM

Re: Listening to small-time artists.

There isn't that choice, for the collection authority is involved by default. Only acts that have explicitally given permission, or arranged a deal with that particular station will be playable.

There is some good free stuff out there (check out http://irate.sourceforge.net/), but really the best stuff is small-label mainstream. Ie. bands who have professional marketting.

Even if bands, promoters, and stations are all willing to cut a better deal, the transaction costs involved (in time and effort, as well as cash) means that it simply won't happen to a sufficient extent as to create a music scene.

Now the best you'll have is online small labels, scatted across the net. Afficionados only.

Steve Hawkins

April 17, 2007 11:02 AM

I used to find out about new music to buy, when I heard it on the radio. Then over the years radio stations started playing only music from tiny lists. My Wife asked me a few years ago why we never hear the music we buy and play at home, on the radio. I shifted to Internet radio because that was the only place I could hear much of the music produced today. Now they want to kill that. I am very puzzled. If I was a musician I would be very angry as now few will hear what I play. This makes no sense to me. Who are they protecting? I won't buy it if I don't know it exists, and killing Internet radio will go a long ways toward keeping most music a secret. Perhaps Global Warming has affected their brains?

Sally

April 17, 2007 12:37 PM

This is a good time for Myspace, Facebook, Youtube and other social network sites to come together and have a "music review" committee, make recommendations to the public about the independent artists on their sites. Example, Myspace would send out an email, just as Yahoo Launch does, reco'ing Artist A or B "take a listen". That way the public would download from the site direct.

Most artists are taking an alternative route from major labels because of the contract complexity and greediness. It wouldn't surprise me if artists like Beyonce, Avril, Britney, etc. went direct to the public with the music, bypassing the middlemen in the near future. The only thing the majors do is a) lend the artists big money; and b) market the artists. Oh yeh, now the majors want a piece of the artists concert revenue - did you know about that one?

samuel

April 17, 2007 12:39 PM

the only way to handle this, as a web radio operator, is to only play non Copyright Royalty Board aligned talents.

simple solution!

Anon

April 17, 2007 1:17 PM

Good news for indie artists, bad news for artists that are second-bananas on a record label.

"SoundExchange said it looked forward to working with Internet radio companies in order to ensure that the industry succeeds." Who are they kidding? The only thing they're ensuring is crippling Internet radio in the U.S.

If I ran an Internet station I'd just turn my back on greedy corporate music. Who needs them anymore? They turned radio into a bore, they're killing promotion for artists that wouldn't have a chance on broadcast radio, they're repealing fans away. They're turning into the artists' worst enemy.

High Plains Thumper

April 17, 2007 1:21 PM

I thought the purpose of radio stations was to help publicise artwork (music), so people would purchase the media. It seems the whole issue of copyrights and royalties has completely gone haywire.

mort fader

April 17, 2007 1:37 PM

Like slow selling cds electronics has given people a free reign anything they want off the internet. i, personally only listen to classical music on the web. pretty soon there will be a user fee to find anything on the internet. back to the library.

Dr. John

April 17, 2007 2:55 PM

Boy, the record labels just don't learn, do they?
Good luck making money off records after strangling the very folks they use to build awareness. Internet radio site's were already paying 12% of their PROFITS to these guys!
It's like being a fast food franchise, building a healthy or at least sustainable business and then being told that it's gonna be more like 25-40%.

Lots of rules from a bunch of folks that have never sung a song in their lives.

Watch Europe take over internet radio the way they have internet gambling.

Congratulations Lawyers, job well done!

Ken

April 17, 2007 3:12 PM

How about if all the internet streamers and us consumers file a class action suit against the CRB to indefinitely delay this money grubbing ploy. I'd support that. They sound like the government "Hey, let's tax that!".

kb richard

April 17, 2007 4:42 PM

Web broadcasters should cough up a percentage of income if profits are lower then actual income.
Whats it going to to to Sir XM Radio?

DaveOner

April 17, 2007 5:30 PM

This is nothing more than another small step away from free speech.

Howcome people are only mildly annoyed and not outraged by this? Sure it may seem insignificant compared to what other countries face as far as free speech but the Holocaust didn't start at Auschwitz! It takes small steps like this one to get to the point where a minority tells the majority what to think and say.

On the business side, the people that are championing this malarkey aren't interested in innovation to adapt and gain more profit. They just want to lock themselves in and keep everyone else out. Innovation brings competition and they have it well established that they can't compete with some of the minds out there!

John

April 17, 2007 6:38 PM

Very stupid and nearsighted people are the controllers and the custodians of art in America today; that's just the way it is. When we have nothing to listen to but what a bunch of corporate lawyers and Simon tell us to listen to, moronic "pop" music will die the death it deserves.

Aaron

April 17, 2007 6:44 PM

We believe internet radio is the future and major labels will be suffering because of these kinds of rulings. Services such as http://www.instatone.com (currently in co-development by hundreds of bands) aims to attract bands and labels put off by these kinds of regulations. Stay tuned.

Fazal Majid

April 17, 2007 6:44 PM

I don't get it. The labels constantly complain about the market power wielded by ClearChannel (you can bet the balance of payments is going from the labels to ClearChannel, not in the other direction). At the same time, they are doing their utmost to eradicate the one viable competition ClearChannel has.

Aaron

April 17, 2007 6:47 PM

The big labels are basically still trying to bail water out of the sinking Titanic. They are scared ****less that nobody will want to buy albums anymore, so they have to shore up their revenue streams somehow, even if it means extracting death-dealing fees from little web radio outfits. I would be curious to know how much the RIAA lobbies the CRB--I'll bet it is a truly massive effort.

ET Moody3

April 17, 2007 6:57 PM

Many Indie artists are already at major web broadcasters, such as Rhapsody. This turn of events may well stop the digital broadcasters/retailers ( as many do both) from dealing with indie artists such as myself, and it may well be that this move is part of the record companies' drive to regain control over an industry that is slipping from their grasps. I find this to be an insidious and disturbing development, I predict that many indie artists currently enjoying widespread digital distribution will suffer.

Rocky

April 17, 2007 7:28 PM

I don't listen to the music much anyway. I enjoy the local talent.

From Microsoft to Google to Verizon; to cameras on streets, federal meddling in bank accounts, phones and internet and the National ID card next Spring, it seems like a few are intent upon dominating everyone else and the public is fast becoming like 14th century serfs - except we are cleaner and ride around in cars that we are "upside down" in.

Just food for the few. But that's gonna change. . . it's slowly starting to dawn on people that we no longer have individual freedoms in politics and commerce and some day this notion will gain momentum creating a backlash. Be patient.

Web Radio

April 17, 2007 7:31 PM

This is an interesting article. I hope web radio will adapt and not die.
Ikey

Corey Trevor

April 17, 2007 7:32 PM

Its all about ambient techno, the true artists make music because they want people to listen. Not because they want to buy gold diamond encrusted condoms they will only use once. Look at what the lead singer of Nine Inch Nails is doing, he streams his new album for free because he knows if more people listen, more people will go to his concert. Don't feel bad for these mainstream artists, like they dont make a killing off concert tickets, merchandise, etc... For example, I used to like the band Metallica, until they had a little fitty fit about people downloading their music, when they ARE ALREADY millionaires. Screw greedy people, and screw labels, anybody can record their own music today with simple software, and distribution is not rocket science.

Jim

April 17, 2007 7:32 PM

This is a clear attempt by the majors to kill what they can't control. They took control of broadcast radio in the early '90s when they instituted their thinly disguised "indie promoter" scheme as a legal form of payola, thereby pricing small labels out of broadcast because they couldn't afford the massive entry fee.

But the bitter irony is that they can't see that their short term greed has caused their long term suffering. Radio, which had always been the driving force in the American music business, became insufferably boring under the indie promo scheme and music listeners began fleeing broadcast in the mid '90s.

So this is the roots of the current slump in the music business, not downloading. All statistical data shows the downturn began at this point, not with the advent of downloading. But the majors still don't get it, and it now appears they never will.

Hence there may be a real future in an internet radio that's outside the system. Sounds unbelieveable, but that exactly what happened in the '60s with the advent of FM radio; the DJs were set free, the people flocked to it, and the music business was reborn, bigger than ever.

Deborah Terreson

April 17, 2007 8:03 PM

4/17/07

An Open Letter to SoundExchange,

With regards to the new webradio royalty fees being imposed at your behest, I have to ask what on God's green earth are you doing?

Have you actually looked into how little money most of the webcasters have? The only reason I am purchasing NEW music is that I am hearing it on the webcasts - because heaven knows, there's scant offerings coming from the Clear Channels and other Big Media outlets.

Frankly, I've about had it with the RIAA's push for 'extra revenue', at any and all cost to the music listener. Do you know how much contempt I am learning to have for the music 'industry'? I can't even find a decent non-commercial site to listen to, that plays interesting new music without it being put off the air for lack of enough money to meet the RIAA’s royalty demands.

Interesting how the RIAA has formed the SoundExchange outfit to grab as much capital as it can - webradio as internet jukebox with each listener having to pay per song - is that it? I have a feeling that's where you're going, eventually, I think you'll try to push it there.

I am already NOT listening to my favorite webradio stations because I don't want to burden the owners with more debts than you've already yoked them with.

How do you think that makes me feel, to know that just by *listeneing* and getting JOY out of music that I hear, that these wonderful people could become indebted to you? Financial bullying of this sort takes the love out of listening to music for me, and makes it something bitter and sour.

I am at the point where I do not want to listen to music again - and here's the ultimate irony - I'm IN the Arbitron/Nielsen MVP Media Voice Panel (so more than anyone who may be writing to you, I DO count, each and EVERY day) and rarely listen to commercial radio or even watch television - so it's not like I have a lot of sources available to hear new and exciting music anymore, do I?

This week I *planned* on purchasing some new CD's - I've been hearing a lot of new sounds and was actually getting excited about some of it. Artists like Amon Tobin - whose music I love, and I have recently discovered Paul Haslinger as well and was looking forward to picking up a disk or two of his.. But maybe not.

I am so sick to my heart, right now I could easily not buy another new CD ever again.

Here is MY cost to the labels, for them to retain my business: Push the RIAA through SoundExchange to reset the current webradio fee structure to its prior 12% of profits model and give the web radio industry 10 years to reach viability and most importantly, profitability before re-negotiating royalties. The immediate profit demands of your shareholders is not my concern - I give you your profits as a customer, while the stakeholder takes your profits - who is more important to you in the long run?

These are my simple terms. I will not reward you with my business otherwise.

In the meantime, I thank you for helping me save money - or - hey, what the heck - I can go buy a nice meal with my CD purchasing money instead.

At least that is still a joyful experience.

Sincerely,

Deborah Terreson
Portsmouth, N.H.

mike king

April 17, 2007 10:38 PM

What is the surprise? You have RIAA, those sincere trustees of Big Music creating a pocket non-profit "regulator" (like ASCAP and BMI weren't already there) who creates rules that clearly are in sole interest of the RIAA members. These people are so concerned with public opinion they routinely file suit against innocent grandmas for illegal downloading.
Their terms and rates are reviewed and literally rubber-stamped by an administrative court composed of political appointees from the always caring Bush Administration sworn to work for the public (companies) good.
If you can getaway with a fake war for oil, why not a fake regulator for entertainment. So they did. So is this the "democracy" we are exporting?
People, how blind have you become? The facts scream the truth.

Josh

April 17, 2007 10:47 PM

Long live pirate radio!

Mr x

April 18, 2007 2:27 AM

Hello RIA, I just want you to know that the last time I purchased a CD was back in 1997 for about $20.00 after tax.
Independent is the way to go so id like to thank you for showing me the way.
I won’t buy anything from Sony or anybody that treats me like shit.

Dario

April 18, 2007 4:22 AM

This is why I havn`t purchased any music from the major labels for years.

This sort of behavior from the music industry MAKES ME PROUD to be a illegal file sharer. Well, not really illegal, since the country I live in is not controlled by those sick American companies and I can download & upload to my hearts content.

It`s my way of protesting, I just don`t buy content, any content, no music, no DVD`s, no HD-DVD or BlueRay and no software, it`s all available, on the net, FOR FREE.

If the industry were not such bastards, I would have purchased all this content, but now I`m all setup to copy, anything and everything. Now, I don`t know if I`ll ever pay for content AGAIN, EVER AGAIN.

Your losing customers, not just for a while, but for life.....

Jason

April 18, 2007 1:40 PM

Anon above said: "Good news for indie artists..."

HOW? How is this good for anyone really? Indie artists need those smaller webradio broadcasters out there playing their tunes in order to get the exposure they desire, I know this because I'm an Indie artist. Webradio needs to flourish, like Deborah said above, so it can become a viable and profitable industry. This decision by the CRB affects not only the stations that play the same schlock the corporate terrestrial radio stations are playing it affects those playing niche music, those stations that may only have several thousand listeners - like SomaFM to name my personal favorite. Those are the small webcasters that will undoubtedly fold under these outrageous, extortionist fees.

I also disagree (firmly) with DaveOner's assessment that this is a small attack on free-speech. This is a money-grab, nothing more, there's no plot to kill off free speech hidden in the CRB or RIAA's agendas. Now go back to reading your copy of Catcher...

I also concur that this is going to open up Europe to become kings of Internet Broadcasting. I hope to see a bunch of these stations shut down their US operations and move them north to Canada or overseas and resume broadcasting there if it's feasible instead of folding altogether...

Bob

April 18, 2007 1:47 PM

It is exactly what americans deserve! This country never has been free and never will be free! The people won't stand up and tell, not ask their government what to do! You replace all of the current politicians, and when those don't do what their told you replace them! Keep repeating the process untill they get it right, can't be any worse then the present system!Copyright doesn't stand for what it is suppose to, and for good reason, it is as corrupt as the government! Everyone knows copyright needs to be overhauled!

steve

April 18, 2007 2:05 PM

Quite frankly the World Wide Web is global. If you want to listen to internet radio, just go to internet radio sites located in another country that do not have these stupid laws.

musician

April 19, 2007 12:44 PM

Maybe I'm not "at the heart" of the music industry, and maybe I'm not the sharpest knife in the drawer - but I do know this:

Listeners are number one in music, and musicians are number 2. Listeners and fans are what need to be fostered and nurtured. Reasonable profit models always work - models in which the customer is the first consideration.

Albion

April 19, 2007 1:21 PM

Although I agree with Mark's comment, it's simply not going to happen. Americans don't think, much less want to think for themselves. They want some entity to tell them what they should be listening to, and that's big media. Why should I have to waste my time flipping through podcasts and net radio searching for something good to listen to when 97.5 WDUM and MTV have it right there for me with a push of a button.

My guess is that the majority demographic for popular music in the USA is 14 to 25 years old (the High School and Club crowds). People at these ages are mostly driven by the group dynamic. In other words they like what all the people in their group tell them to like. With that in mind, if you can take independent music and somehow make it cool amongst the 14 to 25 year olds, then big media will either change their ways or go away altogether.

Personally I despise manufactured music. Like they say, perfection is sexy but imperfection is sexier. What would you rather have, a hand made viola or one that was pressed in some factory? Sure the factory violas are perfect and all sound the same, but they lack personality and character. The same goes for music; if I hear another f'king Nickleback album that sounds just like their last album I'll f'king puke!

Matt the Rat

April 19, 2007 1:53 PM

Here's a thought... Everyone should burn all of their MP3's to a CD and meet down in the park on Saturday morning. Maybe you can "find" some MP3's on a CD that was"dropped" by some careless individual. Wink, wink, nod, nod.
Of course, you can't actually give them directly to anybody. That would be wrong.

tom gee

April 23, 2007 5:42 AM

Maybe we need to all sit around the campfire and sing old-time tunes. At least then we wouldn't be in jeopardy of violating the law... Or would we? This decision to charge more to honest folks who want to spread some joy in the world is just another example of being oppressed. I say... I'd like to teach the world to sing...

"Slashdot reader"

April 30, 2007 2:39 PM

Wanna get even hotter under the collar?

Sticking to non-RIAA acts won't work--SoundExchange wants the right to demand compulsory royalties from *all* streaming broadcasts, whether the artists are RIAA-affiliated or not:

http://www.dailykos.com/story/2007/4/24/141326/870

Reese

May 1, 2007 3:28 AM

Seems like every bastard wants their buck. A true artist creates for the thrill of creation. A true artist lives in the joy of making something come to life, to bring something new and exciting in the world that was non existent before. Is it not enough to spread that joy of creation to other individual and relish in their joy as well? Do artists really need money or compensation to do something they love and enjoy doing? Shouldn't the joy be payment enough?

Yes, art takes time. As an artist in many fields I very much realize this. I also realize that to truly focus on my art I need to make sure that I am not attending some other full-time job that will ultimately distract me from my art form, whatever it might be at the moment.

The problem we come to is latent in the very thing we seek as a solution: money... or more accurately, economics.

Everyone has a talent. Everyone has something they purely love and enjoy doing. Everyone has a creative side and an art form through which their creativity is manifest. Some people like to work with wood, they are carpenters and that is their art form. Some people work with computers, that is their art form. Some people write music, some people design buildings, some people build buildings, some people farm, some people take care of animals, some people take care of other people. Some people are scholars and some are teachers. In an advanced society, there are many trades to fill, and there are just as many people who are willing to work those trades for the pure joy they get out of it.

Money is not needed.

In a world where everyone does what they have joy in doing, there is not a gap that will not be filled and everything will be plentyful. Farmers will do what they like best and the food will be freely available to everyone. No one will need to pay for medical expenses when there are individuals who have a desire and love to heal and help others...and when a doctor truly loves to heal, they are the best doctors in the world.

There will be people out there who enjoy being laborers, I already know plenty of them. There are people who love to clean and organize and they are willing to be janitors.

All these things are very clear to me. All the functions of a society came out of the natural desires of its individual citizens. Money was added later in the equation because there were so few people with a single trade to service the many who wanted it. In today's society, our population is so large and our technology for transportation and shipping is so advanced that money is no longer needed. In this type of society, there will be no such thing as greed for how can you be greedy when everything is freely available to you. The only time an individual becomes greedy is when they are denied what they truly want. Artists want to make art, and they will be as greedy as they can in order for them to continue to fulfill the desire that they have in life. This is no different for anyone else. In order to live freely, we need to adopt a truly free society...and this type of of freedom DOES come free.
This is just my first point on this topic and I hope I've explained it well.

Point two: Even if we were to consider using money within the context of an economic infrastructure, using it to pay for information is laughable. Information is materialistically non-existent...so what are you trading your money for? Might I also add that your money is just a piece of paper and is not actually backed by anything physical like it used to be. But lets get theoretical once more and pretend that one dollar is equal to one joule of work. That would mean that for x number of joules needed to create a musical album, the buyer would pay x divided by the number of physical cds printed in order for the authors to regain what energy they displaced during the creation process. I believe that if we were to transpose this equation over our current media conglomerates, we would see that they are hording more energy than they are actually using. They are in effect taking energy from us.

In an economic system, the energy spend has to come from somewhere, and it is only in cases where the energy does not balance where we see major shifts and divisions in the classes. To put it simply, the rich get richer and the poor get poorer. Who will give energy to the poor?

JohnnyBos

December 13, 2007 2:34 AM

Reese,
It is nice that you are trying to think outside the box, and I don't want to indulge you going way off topic too much, but our current form of government and economics was a masterfull culmination of the lessons of all of recorded history. Everything has already been tried, and there is nothing that is perfect. The perfect existance for an antelope is not getting eaten by a lion and the perfect existance of a lion is getting to eat an antelope.(yum) Without lions the antelopes would run out of food and all starve which is probably worse than getting eaten. In a world without competition there is no striving for exellence. There would just be a huge mess of useless dolts expecting the world to give them something. Everyone who wants to, can't play baseball professionally. I'd love to be a baseball player but I suck at it. If I were awsome then I'd be one.
Back to music:
How many joules must I pay under your system for a piece of crap album that someone made that nobody wants. Am I forced to by it so that some untallented dolt can have his job as a music maker. We have a free market which means no one has to buy crappy music, and crappy music makers will have to look for something else to do. Hopefully they'll find something they enjoy doing AND are good at.

Brandon W

December 13, 2007 4:14 PM

Reese, I think I just threw up a little.

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Bloomberg Businessweek writers Peter Burrows, Cliff Edwards, Olga Kharif, Aaron Ricadela, and Douglas MacMillan, dig behind the headlines to analyze what’s really happening throughout the world of technology. Tech Beat covers everything from tech bellwethers like Apple, Google, and Intel and emerging new leaders such as Facebook to new technologies, trends, and controversies.

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