As you read this story, please keep in mind that this is the very scenario I had been warning people about for the
past couple of years.
I recently had a conversation with one of the Sound exchange people who tried to convince me up and down that the so called small webcasters were being given a break and that Sound Exchange which is really the RIAA in disguise was doing everything they can to level the playing field and making it easier for those who can't afford these outrageous fees to be able to Internet Radio.
This sound exchange person was in total disbelief when I explained to her that what they had done was actually made the playing field a lot harder and that within a couple of years Internet Radio will be exactly like the commercial radio stations that we ran away from.
The sound exchange person was going on and on about how wonderful it was for independent artists and seemed impervious when I explained here in Oakland-home of independent rap artists many of the artist I know found they had fewer outlets, not more.
Lemme explain to those who don't know the dirty little behind the scenes secrets. Sound Exchange gave everyone including Congress a song and dance routine about how they were going to lower the fees for the small-time webcaster. The problem is that for most so called 'small' webcasters getting into the game as a music fan, hobbyist or someone frustrated with the staleness and rigidness of commercial radio is difficult. First, you have to have your own server and technical know how. Second, you have to know how to file paper work with ASCAP and BMI etc. For the average person that's pretty daunting, hence people have turned to small companies who while small to us are considered 'big' to Sound Exchange meaning they have to pay those big fees. They don't get a break.
So now what's been happening, is that those smaller businesses are scaling back, or raising fees so that its unaffordable for that hobbyist/frustrated music fan. To take things a step further many are finding its better to directly negotiate with the a a couple of major record labels which in turn results in folks only playing music from those major labels catalogue while leaving the small independent artists off their playlist.
Let me explain how this works.
When Sound Exchange (The RIAA in disguise) came along and proposed these outrageous fees, many folks scoffed said 'good', they simply would stop playing major label music. For many the reason why the Internet had become popular was because major labels through payola and cozy relationships had come to dominate commercial radio. This in turn resulted in tightened playlists and formats. So in essence many who turned to the Internet weren't interested in playing the same music as Hot 97 or Power 106 or some other commercial urban clone. They didn't wanna play 50 into Cam'ron into whoever was the flava of the month. Many wanted to use the Internet to blow up their local music scenes or turn people onto exciting artists who had not broken through the commercial ranks. In many ways by making it so expensive to play major label music was good thing because now legions of people would go out and discover those under-exposed and under played artists.
So instead of taking their lumps and dealing with the mediocre offerings of the major labels, Sound Exchange came up with this scheme which basically made them the representative of ALL artists. It didn't matter whether you were down with their program or not. They would be in charge of collecting money on your behalf. So in other words, lets say I have a a few artists who live in my neighborhood who wants me to use my Internet radio station to expose their product. Well the way this whole scheme works is I still have to pay Sound Exchange these fees unless the artists I'm playing decide to go through a process of opting out or signing some crazy waiver forms.
So lets say I have 5 artists and 4 of them say yes please play my music and don't worry about the fees, but one of them decides they wanna get paid everytime their music is heard on your Internet station, you as a small webcaster have the responsibility of keeping track of everything or risk getting jammed up or sued by Sound Exchange who by default reps the artists.
Now keeping tabs of 4 or 5 artists is not that hard, but let say you live in a place like the Bay Area where you have close to 500 indy artists just within the rap genre, thats where things get to be quite daunting. What started out as a hobby designed to be a fun alternative to commercial radio now has become a full-time job just to keep track of the paper work to make sure you're not playing one of the artist who wants to be down with Sound exchange..
Adding to this is the fact that Sound Exchange went and bamboozled everyone into thinking that they were given small webcasters a break. No..think again.. that break is for a set amount of time, so you can go out and get your business plan together and you can go out and get advertisement and sponsorship. That sounds easy and reasonable to do right? Well maybe if the local commercial stations we all ran away from weren't bent on getting into the Internet game themselves. So now you have your local Hip Hop and R&B station with a dedicated sales team running around trying to get ad money from the same people you wanna reach for a similar service-Internet radio. Who do you think will win at the end of the day? At the end of the day Sound exchange doesn't want us to escape the duldrum of commercial radio .Peep the article below as they explain how we're getting ready to see the direction Internet radio is headed.
Davey D
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Internet radio firms say royalties limiting choices
By Hiawatha Bray
For Barry Cedergren, the decision to stop broadcasting nightclub music over the Internet was a matter of simple arithmetic.
Much as he enjoyed playing music online, a big increase in music performance royalties made it too expensive for him to continue operating Mobile Beat Radio.
"It was going to cost us tens and tens of thousands of dollars just in fees to play this music," he said. Cedergren launched Mobile Beat Radio from his home city of Minneapolis in January 2007, two months before a panel of federal judges approved a big increase in the performance royalty paid by Internet broadcasters every time they stream a song, prompting him to immediately shut down his site.
Cedergren's story is the nightmare scenario painted by many Internet radio companies who have claimed that the royalty hike would kill online broadcasting in its cradle. In fact, Internet radio is far from dead.
Online broadcasters like Pandora and Live365 still serve millions of listeners. But the higher rates have driven away many small online broadcasters who say they can't afford to stay in business. And even industry leader Pandora says it's in trouble.
"We're at the very end of our tether," founder Tim Westergren said. "There's a very good chance that we will shut down.
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Critics of the royalty system say the result is decreasing musical diversity on the Internet. They warn of an online music industry dominated by the same giant media companies that presently dominate traditional radio broadcasting. And they point to CBS Broadcasting Inc.
's recent takeover of the Internet radio operations of Time Warner Inc.'s AOL as a harbinger of an Internet radio market rendered bland and predictable.
"They'll push all of us out of business," said Johnie Floater, general manager of media for Live365. "Your Internet radio is going to sound like your AM and FM.
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Thousands of Internet broadcasters, ranging from traditional radio stations to individuals who want to share their favorite tunes with the world, pay Live365 to stream their programs over the Internet. Live365 pays their music royalties out of the fees paid by its subscribers.
But so far, the company hasn't begun paying the higher rate set last year. Live365 and other Internet broadcasters are in negotiations with SoundExchange Inc., the recording industry group that collects performance royalties, in hopes of settling on a lower rate. While some Internet broadcasters are paying the higher rate, Live365 has withheld payment until the negotiations are complete. A SoundExchange spokesman said his organization is entitled to the money and will collect it retroactively.
Floater said many small subscribers, afraid that these retroactive fees will bankrupt them, are shutting down their Live365 music streams. Others have cut back the number of music streams they offer or the number of Internet users who are allowed to tune in. Because they must pay a royalty every time an individual listens to a tune, some Internet stations now drive away listeners to keep their royalty bill down. As a result, Live365 now broadcasts 15 million hours of Internet audio every month, compared to 25 million hours a year ago.Continued...
One Live365 broadcaster, the Rock. com service of Laguna Hills, Calif., last year broadcast 50 different channels of rock music and attracted 150,000 listeners per month. It has since deliberately reduced the number of channels to 33, eliminating unusual channels like one devoted to reggae music and another that featured only female artists. Monthly listenership is down to 15,000 a month, which lowers the royalty bill. But chief executive Steve Newman said his business still can't make money. "With the new rate structure, it's absolutely impossible," said Newman.
Even Internet giant AOL, which broadcasts about 200 channels of Internet music, found it couldn't cope with performance royalties. On March 7, AOL said it would hand control of its Internet music operations to CBS Broadcasting Inc., which runs about 150 traditional radio stations.
Fred McIntyre, senior vice president of AOL Radio, said that even before last year's increase, royalties were too high to let his business operate at a profit. "There's no way you can build an Internet radio business, operating the way we were, with these kinds of royalties," McIntyre said.
He said CBS has a major advantage because traditional radio stations pay royalties to music publishers, but not performance royalties, which go to recording companies or musicians. Internet, cable, and satellite stations must pay both publishing and performance royalties.
The recording industry is pushing for federal legislation that would force traditional broadcasters to pay performance royalties. But for now, CBS hangs on to more of the ad revenue generated by its traditional radio stations. It can use that money to help cover royalties owed by their Internet radio streams. In addition, some CBS stations broadcast only news or talk shows, and therefore pay no music royalties, whether broadcast on the airwaves or the Internet.
As a result, say Internet radio experts, giant traditional broadcasters might end up dominating Internet radio, while higher performance royalties overwhelm smaller online players. "If Pandora can't make it, if Live365 can't make it, then . . . CBS, Clear Channel, and Entercom are going to take over Internet radio," said Jonathan Potter, executive director of the Digital Media Association in Washington.
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