Saturday morning I attended the Viability of Internet Radio session that was part of a University of California Radio Network conference organized this quarter by KALX, the radio station at Cal that my wife runs. The four panelists were:
- Brian Zisk – founder and Technologies Director for the Future of Music Coalition
- Rusty Hodge – founder of Soma FM
- Elizabeth Rader – Fellow at the Stanford Law School Center for Internet and Society
- David Porter – Director of Business Development for Live365
This excellent session was moderated by Lee Montgomery, KALX DJ and co-host of the Amandla show.
Important note: I tried to take notes accurately. However, it’s obviously possible I made a mistake in my notes. Anything that sounds stupid or incorrect is almost certainly my fault.
All four panelists were very informative and obviously extremely knowledgeable about Internet radio. They worked very well together as a panel, despite the fact that I don’t think any of them had ever met in person. By the end of the session, they were finishing each other’s sentences.
The session started with a little history. Elizabeth explained that many of the copyright issues started with the passing of the Digital Performance Rights Act in 1995, which was targeted mostly at digital radio stations delivered through a cable TV box. This act was later expanded to non-subscription services. Brian believes that the FCC stayed out of the action at that time because their charter was to manage a “scarce” resource – spectrum. He contended that the spectrum scarcity is an artificial scarcity caused by the fact that existing radios aren’t good enough. If they were better at isolating narrow broadcast frequencies, spectrum wouldn’t be scarce.
While I think he is right about the FCC’s and the large corporate radio station owners’ exaggeration of the scarcity of radio spectrum, we do have to live with the reality of Information Theory, as originally explained by Claude Shannon. Only so much information can be crammed into a signal transmitted in a given frequency range, and the economic realities of the transmitters as well as the receivers and the physical complications of terrain and other large obstacles will always limit how many radio signals can be broadcast in a legislated frequency band.
Elizabeth stated that the Corporation for Public Broadcasting (CPB) withdrew from the Copyright Arbitration Royalty Panel (CARP). But, they struck a confidential side deal with the RIAA that covers all NPR stations. The deal is rumored to be a very liberal agreement with a flat fee. One significant difference for NPR stations, though, is they mostly produce their own content, which would not be subject to copyright payments anyway. Rusty added that CPB wants to protect their stations and he thinks they feel very threatened by low power FM stations.
After being asked to explain the history and purpose of Live365, David amusingly said that Live365 is operating as a profit-seeking corporation. Ad revenue is not sufficient, so they are shifting to a subscription focus. They originally did not charge to broadcast. Now they are charging everyone – $10 or $20 a month for basic plans. They also have a pro option where their relationship changes to being a wholesaler. For listeners, they offer the option to not hear ads for $5/month. One of the biggest benefits they provide to a small webcaster is that Live365 takes care of reporting and the payment of royalty fees. If you look at the reporting requirements for webcasters, you will realize that this is a major benefit.
If you broadcast via uploaded MP3 files that have been tagged appropriately, it’s very easy for Live365 to provide your reports. However, they have other ways of generating the reports if the tags aren’t available. Rusty pointed out that a lot of the music fingerprinting services (most of these work by pattern matching a digital fingerprint of a brief portion of a song with a large number of samples in a database) primarily include only music by major artists and current releases. If reports generated by these services are used to compensate artists, there is a risk that small artists will receive no compensation.
Elizabeth added that the reporting data the RIAA wants to collect is potentially far more valuable than the royalties they are charging. If they are able to sell this information, that could generate a very large revenue stream.
Rusty was asked about how Soma FM gets listeners. He said branding was a much bigger factor than he had even anticipated. He said their non-branded channels were ignored over time, but the channels they strongly branded grew quickly in popularity.
Someone asked why webcasters seemed so surprised by the royalty rates established by the CARP. Elizabeth said that the meter started running in 1998 with the passing of the DMCA and that people were supposed to know they were liable, although it wasn’t widely understood until the last year or two. Rusty said that in Europe people are paying about 5% of revenue. Some people in the US expected similar rates. When asked about who represents the small guy, Rusty said no one. You need a lawyer and you need a lobbyist.
Rusty said that Soma FM went offline partly as a protest of the CARP royalty decision. David added, “By the way, that was great marketing!” Rusty smiled and said they probably would have been okay financially if they had had to immediately start making payments, although it’s hard to know. He waited about a month after the payment deadline to send in his first check to the RIAA. It took them two weeks to mail him back to say they received it. One month later, they still haven’t cashed the check.
Brian then switched to the topic of the RIAA’s recent pursuit of four college students for operating file sharing services. By demanding $150,000 per copyrighted work (as allowed by law) for a claimed combined total of over 2 million shared music files, the RIAA is seeking over $325 billion from the four college students. Brian said he has read that these students weren’t the ones necessarily sharing the most files, but were the people who wrote software front ends that made it easier to share files on the networks.
Below are some more interesting comments that I have prefixed with the initial of the speaker:
- B – BMI evolved because the other copyright company wouldn’t collect fees for R&B artists because they didn’t consider it to be music.
- E – Colleges are on the back of the line for settlement. The RIAA doesn’t want to establish a small settlement that could be used against them later by large companies. Small webcasters have until the end of May, although the Copyright Office says that everything should have been settled by the end of March.
- B – The RIAA won’t sue Canadian companies because Canada doesn’t have a contributory copyright infringement law. The RIAA doesn’t want to establish a precedent where they would almost certainly lose.
- D – 25 % of Live365 listeners are overseas.
- E – The RIAA spent about $12 million to create the infrastructure for CARP.
- B – The RIAA see themselves as the pitbulls for the record industry, with the role of deflecting criticism from record companies.
- R – If you want to get into webcasting, make sure you are willing to do it for the long term. However, he’s optimistic about this for the small guy. He recommended that people at least start out with Live365 before committing a lot of money to an independent effort.
- E – Don’t give up yet. Still have appeal in the US Circuit Court of Appeals. Will keep pressing appeal. Excited about writing a brief. They may throw out CARP. Also, CARP reform efforts are underway.