August 07, 2002
The Internet Radio Fairness Act could save Internet radio. When it hit the floor of the U.S. House of Representatives last Friday, webcaster Michael Roe was standing in line at a bank teller in his hometown of Jacksonville, Florida, weary from a recent trip to Capitol Hill to lobby the bill. At about 10 a.m. his cell phone started going berserk in the bank. "Yeah, hold on a second, I've got another call," he said, switching conversations. "Hello?" His phone chirped with calls from reporters, friends and fellow webcasters panting about the bill and congratulating him on his successful lobbying efforts. He picked up my call as he left the teller line and stepped outside. "Sorry about that, my phone's been ringing every ten seconds." I asked him if he thought the bill would pass. "I think it will definitely pass. The timing is perfect."
The fate of Roe's popular Internet radio station, RadioIO, was not the only thing at stake with this new bill. Thousands of other independent webcasters' stations hung in the balance, having been taken off the air by the Recording Industry Association of America (RIAA) on June 22. The RIAA is a trade group that represents record companies. Webcasts are usually small, independent labors of love run by music fans. "The bill will have a dramatic impact on future outcomes," Roe said. "Hold on, I've got another call."
Internet radio, not to be confused with Napster-esque peer to peer file-sharing programs, is a streaming webcast of music transmitted over the web by DJs like Roe. These stations play artists like Hem and Josh Rouse, who almost never get played on mainstream radio. Larger sites such as Live365 and AOL's Shoutcast host hundreds of stations and offer a wide variety of music with minimal commercials, DJs or corporate agenda, 24 hours a day. Sound appealing? A lot of net-savvy people seem to think so. Of course, like most all new technology that's cool and free, it's currently being litigated and is on the way to being outlawed.
But they should have to pay, right? Shouldn't artists be compensated fairly for their work? Well for starters, any money that the recording industry collects from independent webcasters will likely go in to the record industry legal team's Mercedes Benz upgrade fund--this is not a battle for artist compensation. The record industry trade group's mission statement doesn't even claim to represent the artists, it represents the record labels that hold the copyrights. Secondly, traditional "terrestrial" radio stations don't pay a dime to the record labels, so why should Internet broadcasters? In fact, in the terrestrial radio world, record labels actually pay stations to play their music so they can sell records. In the industry it's called "servicing."
Rockie Thomas of Chronix Radio in Denver explains. "The recording industry will go to a promoter and say, 'Here's half a million dollars. We want this Rage tune in heavy rotation in the top twenty markets.'" The promoter, not unlike a mafia laundry man, offers the program directors of the top twenty stations, say, 150 dollars for each time they add a song to a rotation. If they refuse cash, they may still accept prizes for their listeners, like a trip to see Rage Against the Machine live in LA with backstage passes. The labels' hands are clean; they didn't pay the stations to play the new Rage song, the promoters did. Internet radio essentially challenges this money laundering--er, business model--and makes it easier for independent labels to get exposure by potentially cutting out the Big Five record labels' influence.
But we'll get to that part later. The reason the recording industry is afraid of Internet radio and feels compelled to litigate, according to Thomas, is that they don't want the 'MTV thing' to happen again like it happened in the '80s. "Because, you know, [the recording industry] doesn't get any royalty money from anything that spins on MTV. MTV basically made a hell of a money machine off of their product," she says. And they're afraid that's exactly what will happen with Internet radio.
We could sympathize with the recording industry. After all, aren't they still brushing their suits off from trench warfare with those pesky Napster-loving college students who want everything for free free free? Won't the artists suffer in the long run? First, a little history.
In 1998 a new law granted record companies the right to collect royalties when their songs were played via digital media. The law was called the Digital Millennium Copyright Act and it included Internet radio. Because the law was set during the Internet boom, it was set artificially high. (In February of this year the Librarian of Congress decided to peg the royalty rate on a Yahoo!/RIAA settlement, at 14 cents per song per listener for internet-only webcasts, and 7 cents per song per listener for commercial radio simulcasts. A June 22 arbitration cut these rates in half.) The money may sound minimal, but given the fact that most webcasters have zero revenue, only the largest stations could avoid bankruptcy. Also, the fees were retroactive to 1998. To put these rates in context, an independent webcaster run out of a home office, broadcasting for the last three years with an average of 1000 listeners, would owe roughly $262,800. Ouch.
"There we were rockin' along," Hilary Rosen of the RIAA said recently at a speech in New York, "producing great music and producing enough revenue to support artists, producers, writers, engineers, A&R teams, new investment by record companies and a vast and wide distribution system. Then suddenly we wake up one day and everything we have worked so hard to produce is being offered to consumers for free. Not 10 percent off. Not quarterly payments. Not reduced interest rates. Not negotiated payment schedules. Our product is suddenly being offered to consumers for absolutely nothing."
Just for the record, I'm listening to the recording industry's "worst nightmare" as I write this, freely streaming a webcast on Live365. While Rosen runs her mouth about how Internet radio has the potential to ruin record sales, in reality the opposite is true. Internet radio gives bands more exposure and helps fans find and buy more records.
On Live365, each webcast has a link next to the track that's playing says, "Buy," directing the listener to a page at Amazon.com or CD Universe that sells the record. RadioIO has a similar link next to its current playing track and according to Roe, RadioIO has sold over 38,000 dollars in music...and that's just in the past two weeks. CD Universe keeps detailed reports on how much money is spent on records from webcasters' links, and clearly Internet radio is having a large impact on online retailers sales.
"It's ironic," Roe says, "that the industry that I serve, by pointing my listeners to their music, is trying to put me out of business. If the labels were smart, they would see the Internet as a great way to distribute the product without the expense of retail, and they would partner with the Audiogalaxies and the Napsters of the world and together come up with a viable business model that allows them both to survive. They would also be partnering with webcasters realizing that we're programming niche formats." Many of the songs that stations like RadioIO are playing give exposure to new artists and drive their record sales. Artists who have had little exposure on commercial radio are stars on Internet radio, where people are requesting and buying their music online.
Make no mistake, people who listen to Internet radio are generally fed up with the stylized trash on commercial radio, so it's no surprise that formats like underground hip-hop, indie rock, classical and jazz are popular with internet radio listeners. Webcasters and listeners are people who gravitate toward artists on independent labels, the very labels that haven't historically come up with the money and influence necessary to get their new artists played on the radio. "And guess what," says industry vet Rockie Thomas, "if the recording industry isn't careful, they're going to start seeing people just bypassing the big labels and buying directly from independents, and then they're basically going to lose their power."
Most independent webcasters agree. Rick Burroughs of IndiePopRadio.com in Portland says, "I work with a few promoters, but deal mostly with the artists and labels directly." The relationship between webcasters and indie labels has been strong, but there are still a lot of webcasters playing major labels' songs, said Burroughs.
While you might think that the artists would back the RIAA's efforts to see that they are properly compensated, it turns out that many don't. Over 500 artists' have signed a petition against the RIAA's actions on the Voice of Webcasters site, no doubt realizing that the only thing Internet radio can do is increase their exposure, which is precisely what they need to sell records and be financially successful. Webcasters side with the artists and think they should be compensated for their work.
Bryan Burns, 25, of Evil Scheme indie rock radio in the Bay Area, will abandon his webcast this week because he refuses to pay the new five dollar fee Live365 has imposed on webcasters. "If I knew the per-song royalty was going to the artists I would pay up in a second, but I have a sneaking suspicion that the artists will never see a penny of it." Mark Frazer of Seattle, 27, says that his Riot Grrl station Bust.com will continue to broadcast with Live365. "As of now, the five dollar royalty fee is more of a nuisance than a deterrent. If the fee continues for a long period of time or starts to rise I will most likely stop my Internet stream," he said.
Rockie Thomas sees the bigger picture. "I've been in this industry since 1997 on the terrestrial radio side, and I keep saying to myself that this industry needs to get its shit together. It's gotten to the point where everyone sticks their fingers in their ears like little kids going, 'I'm not going to listen to you, I'm not going to listen to you,' because I'm afraid I'm going to get screwed.' Look, there's enough money in the kitty for everyone, and that goes for FM, AM, internet, peer- to-peer, if everyone would stop being such lawyers for one minute and sit down and talk about a way that we can make sure that everyone gets compensated."
The Internet Radio Fairness Act was introduced on the last day of the congressional session because members of the House are now in their home states listening to the needs of their constituents in this election year. Michael Roe hopes that Internet radio listeners will fax their congressmen and remind them that their reelection depends on it. The bill is about so much more than Internet radio; it's about shifting power in the music industry away from the Big Five record labels, about helping out the independent webcaster and the independent label, and about having access to new music without a corporate agenda. It's a chance to start cleaning up the dirty business of music in America, one stream at a time.
Send an email FAX to your congressman at the Voice of Webcasters website
Special thanks to Paul Maloney of the Radio and Internet Newsletter.