p2pnet news view RIAA | Radio | P2P:- I listened to most of the recent hearing held in front of the Senate Judiciary Committee on Radio Royalty Rates.  It was something of a peculiar assortment of witnesses because there wasn’t one broadcaster, terrestrial, satellite, or Internet, among the speakers.

You’d think the Senate would like to hear from the folks who are going to have to pony up the money, but I guess they really couldn’t do that “balanced” presentation they like because they could only find one broadcaster insane enough to endorse the royalty rates now in effect or being proposed for terrestrial radio —- Joe Kennedy of Pandora.

The committee clearly didn’t want to have too much information on the issue to get in the way of making up their minds.

I missed the first panel, which featured Senators Ron Wyden (D-Or) and Bob Corker (right) (R-TN).  That was too bad, because I’ve peppered Corker’s email over the last year or so with periodic inquiries as to where he stood on the issue.  I always got back the canned response that he was looking into the matter seriously, blah, blah, blah.

When I saw his name on the witness list, I figured he’d finally dropped the pretext.  He was paired with Wyden, who, with Sam Brownback (R-KS), is sponsoring the Senate version of the Internet Radio Equality Act, the bill that would allow the webcasters to pay the performance royalties on the same calculation as those used by satellite and cable services.

Because of that “balanced” approach, it was clear Corker, my senator, wasn’t in favor of the bill, and had aligned himself with the forces of darkness marshaled behind the PERFORM Act, the competing bill endorsed by the RIAA and SoundExchange, which sets the royalties at “fair market value,” which of course means the CRB gets to set them wherever they want.

The part of the hearing I did get to hear was nothing special. Everybody came in with their canned speeches.

RIAA meat-puppet John Simson came in with his usual fantasy math on Internet radio profitability.  JeffryHarleson of Geffen Records could barely contain his excitement at the prospect of his label actually making money from the Internet.  John Ondrasek of Five For Fighting poignantly told the Senators how Internet radio was threatening to take food out of the mouths of his family.

Arrayed against them was Joe Kennedy, president of Pandora, who made too much sense to be listened to seriously by Senator Feinstein, who ran the meeting and is the co-sponsor of the PERFORM Act.

When Kennedy said that the fairest standard for royalty calculation was the one found in 17 U.S.C. 801(b)(1), which is used everywhere EXCEPT Internet radio, Feinstein admitted she wasn’t familiar with the provision.

I still can’t figure out why I couldn’t hear the laughter that comment must have generated from the gallery.  It should come as a lot of comfort to the people she represents to know that Senator Feinstein can sponsor legislation without really grasping the alternatives.

I guess she’s one of those people who trust in whatever the RIAA puts in front of her.

God must love those people because Californians keep finding them and electing them to Congress.

With Kennedy was Matt Nathanson, an eloquent singer-songwriter who offered himself as an example of a successful artists without a Top 10 hit who counted on Internet radio to let people hear what he’d to offer, and who realized the stations who play him are the ones who will go silent if the CRB rates remain in place. Mr. Ondrasek was particularly obsequious in making sure the Senators knew that he admired Mr. Nathanson even if he considered him a traitor to the craft.

What happens next is anybody’s guess.  Arlen Spector (R-PA), the ranking Republican on the Committee, pointed out that the issue has become something of a partisan football.  What that means for PERFORM or IREA is unknown.  There isn’t much time before the recess and the preoccupation with elections will take up a good bit of what is left.

After the hearing, I wrote to Senator Corker. This is what I said»»»

 Senator Corker,

I read with interest your written statement presented to the Senate Judiciary Committee on “Music and Radio in The 21st Century.”

I am terribly, terribly disappointed in the position you have taken.

You know as well as anyone the importance of music to the economy and culture of Tennessee.  To actively support a position that will serve to reduce the ways and means that Tennessee artists can be heard around the world is not in the best interest of your constituents.  The extremely high CRB rates for Internet radio are beyond the reach of almost all Internet webcasters.  That will hurt Tennessee in many ways.

You correctly note that there would be no music on webcasts without the musicians and songwriters.  However, you must also acknowledge that if thousands of webcasters are driven from the air, as they will be if the CRB rates are upheld, the loss of places where that music can be heard will be equally as damaging.  Having fewer places to play is never good for musicians.  The CRB rates, if applied, will drive thousands of small  webcasters off the air, and leave webcasting in the hands of the few  companies that can afford to subsidize the high royalties or directly negotiate lower ones..  We’ve seen the detrimental effect of consolidation of ownership in terrestrial radio, and the resultant narrowing of playlists. There is really no need to repeat that history on the Internet.

Leaving Internet radio in the hands of the Clear Channels and Infinities of the business means they will program their stations to play what most people want to hear all of the time.  They will need a big audience to pay the royalties.  That leaves little or no room for the blues musicians of Memphis, the Americana musicians of Nashville or the bluegrass bands of Johnson City, let alone the gospel music makers from all corners of our state.

That music deserves to be heard, and it deserves to find the audience that wants to hear it.  The proposed high CRB rates will silence the greatest means of exposure for these non-mainstream artists since the invention of the gramophone.  That is not good for most Tennessee artists, and it isn’t good for Tennessee audiences.

On this issue, SoundExchange is little more than a front for the RIAA.  Even though the RIAA had no standing to be part of the CRB rate setting procedure, the RIAA and SoundExchange had joint strategy sessions before the hearing.  I can tell you from decades of experience working for artists and songwriters that what the RIAA wants is never good for artists.

It is in the RIAA’s best interest to limit Internet radio to as few outlets as possible.  They cannot dream of controlling what gets played when almost anyone can start up their own station.  Cutting down the number of broadcasters, and seeing that the survivors are the same broadcasters they’ve dealt with for decades on the terrestrial side, gives them a means of control.

So you understand the mechanics, this is how that works:

A broadcaster can avoid the high statutory rates by entering into direct licenses with copyright holders.  Under that direct license, the broadcaster agrees to pay something less than the statutory rate.  The copyright holder is happy to make these deals because the money comes straight to them, and doesn’t go to SoundExchange first.  Under the Copyright law, they don’t have to split that money with the artists like they do on statutory payments.  They can pay the artist whatever the artist contract calls for.

Given that until the last couple years, no artist contract even conceived of Internet radio, there is more than 50 years of recorded music upon which the record labels can argue that they don’t own the artist a penny of Internet radio royalties.  This is not so farfetched.  It took over a dozen years of litigation to establish that a recording artist had a right to share in license revenue from the use of their recordings in commercials and films, because those uses were not in the original contracts.

So, a webcaster signs deals with the four major labels under which he can pay less than the statutory rate for their recordings.  The broadcaster wins by saving money.  The labels win by not having to split the license revenue 50/50 with their artists, so they keep more of it than they would get under the statutory license.

But that’s not all, and this is where the playlist gets severely limited.

That webcaster can’t play any music by anyone other than his direct licensors without incurring the full statutory rate for those “outside” recordings.  Given the choice, with the full understanding that the decision will have a major impact on the webcaster’s bottom line, he’s going to play a record that will cost him a penny in license fees over one that will cost him a dollar.

That effectively limits his playlist to the records provided by his direct licensors.  That effectively limits what the audience gets to hear.

I work for recording artists and songwriters.  I firmly believe that artists deserve to be paid compensation for the commercial exploitation of their creations.  Almost all of my clients are outside the present-day musical mainstream.  They aren’t heard often on terrestrial radio, and that tells me they wouldn’t be heard often on an Internet radio landscape populated by only the same broadcasters.  The high CRB rates insure that they will be unheard.

I found a wonderful Internet station that featured dulcimer music.  It was new to me and I liked much of what I heard.  Through the station website, I found a website for one of the artists.  I bought her CD and went to see her when she performed nearby recently.  It turns out she lives here in Nashville, just a couple miles from me.

Sadly, that station where I found her is now off the air.  The webcaster decided he couldn’t risk a retroactive license increase that would bankrupt him because the royalties would be over three times the total revenue he made from the station in 2006.

I recently spoke to that artist.  The amount of her most recent SoundExchange royalty check dropped substantially.  She told me that other stations that would play her music have gone off the air because of the threatened rates.  She sells fewer CDs than she used to because she doesn’t get the Internet exposure, and she can’t promote her live performances through the stations that aren’t there anymore, either.  Those high CRB rates are having a direct and detrimental impact on her career, and they’ven’t even gone into effect yet.

Artists deserve to be compensated when their music is played by webcasters.

They can’t be compensated if the webcasters aren’t there to play the music.

I would be happy to discuss this issue in greater detail with you and your staff at your convenience.  There are many more details than those I cover in this letter that I believe you will find informative and enlightening.

Please reassess your position on this issue.

Best regards,

Fred Wilhelms

Fred Wilhelms – p2pnet
[If the corporate music industry had any ethics, Wilhelms would be its 'ethicist-in-chief,' wrote CounterPunch's Dave Marsh. Wilhelms is an entertainment attorney based in Nashville, Tennessee. You can contact him at fred.wilhelms @ gmail dot com. ]

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This entry was posted on Thursday, July 31st, 2008 at 8:41 am and is filed under P2P, RIAA News, Radio. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

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