Corporate kleptocracy takes aim at Web radio

The aim of Revolution 21 is to morph into a 24-hour Internet radio station, with an ultra low-power AM service on the side.

Well, was.

See, it's like this. The U.S. Copyright Royalty Board is hell-bent on killing Internet radio . . . at least Internet radio committed by programmers who can't afford to pay anywhere from hundreds of thousands to tens of millions of dollars in rights fees per year.

Non-profit, non-commercial webcasters still would pay just $500 a year under the new ruling -- so long as they don't get popular. But if non-comms average more than 146,000 aggregate tuning hours per month -- that is, average number of simultaneous listeners x number of streaming hours x 30 days -- they have to pay the commercial rate on everything over the cap.

That works out to an average of 202 simultaneous listeners if you stream your station 24 hours a day. Go over that, and it gets real expensive real fast.

And that's enough to give me -- Revolution 21 -- pause.

Veteran broadcaster Bill Goldsmith --who runs the popular Radio Paradise with his wife, Rebecca -- explains it all here:

I have been in love with radio all of my life, and spent 30-odd years dealing with the conflict between my vision of radio as an art form and my FM-station employers’ vision of radio as a conduit for advertising. I have watched the medium that I love turn from an essential part of the process of connecting those who love making music with those whose lives are touched by it into a mindless background hum of advertising and disposable musical sludge.

With the advent of the Internet, we were finally able to bring to life the radio station I had always wanted to work for (and listen to): commercial-free, passionate, and embracing a wide universe of musical treasures, from the classic rock artists I grew up with to the latest indie discoveries, with a liberal sprinkling of world music, electronica, jazz, even classical. We have slowly built up a loyal audience and have been able to support ourselves while living our dream.

The Internet has changed radio in a profound way. Instead of a business that required investments so huge (millions of dollars for even a small-market FM station) that a programming focus on the lowest common denominator and an extreme aversion to risk or experimentation was an unavoidable consequence, a radio station with a global reach was now within the grasp of anyone with the talent and determination to make it happen.

Every day we hear from listeners who are profoundly touched by our efforts - by the music we play, by the way we assemble the songs into meaningful sequences that are more than the sum of their parts, by our passion for what we are doing, and our commitment to never contaminating the music with advertising. And our station is but one of many who have attracted that kind of passionate following, and provided that kind of outlet for radio artists like myself.

The Internet’s paradigm-shifting gift to radio programmers and music lovers - at least those in the US - is now in danger of being taken away by the misguided actions of the US Copyright Board. The performance royalty rates released by the Copyright Board on March 1, 2007 are not just extreme, not just burdensome. They are a death sentence for all US-based independent webcasters like Radio Paradise, SOMA-FM, Digitally Imported, and many others.

The facts and figures of the new rates are detailed in Kurt Hanson’s newsletter for 3/2/07. Kurt’s analysis of the financial impact of the new rates is entirely accurate, and chilling.

There has been much discussion about how unfair these rates are, but our listeners find one fact particularly appalling: while Internet stations like ours are being told they must pay royalty fees that exceed their income, sometimes by several times over, FM stations - including those owned by media conglomerates like Clear Channel - pay nothing at all!

Yes, both FM stations and Internet stations pay royalties to songwriters and/or music publishers. But the royalties in question are owed to the owners of performance copyrights, which means, in most cases, record companies - and to them, FM stations pay nothing at all.

How is it possible for such a massive disparity to exist? For the answer to that we need to go back to the 1990s, when music industry lobbyists persuaded Congress to include wording in two pieces of legislation (the Digital Performance Right in Sound Recordings Act of 1995 and the Digital Millennium Copyright Act of 1998) that drew a sharp division between analog and digital broadcasts. Their reasoning was that a digital radio transmission was not a radio broadcast at all, but a sequence of perfect digital copies of music performances provided to the user, who could then copy them rather than paying to own a CD.

This is a profoundly flawed piece of reasoning, but members of Congress (who at that time had no idea how this whole digital thing worked) accepted it at face value, and agreed that it was only fair that digital broadcasts be subject to additional copyright fees, to be determined by an impartial (in theory…) ruling by the Copyright Office.

Let’s reassess that reasoning in the light of 21st-century reality. Is there, in truth, a fundamental difference in the experience of an online listener to Radio Paradise and someone who was listening to identical programming on an FM station? Every one of our listeners - indeed, anyone who has ever clicked on a webcast as background music while working - knows the answer to that question. No! There is no difference whatsoever. Radio is radio, whether it comes in digital or analog form.

As for the recording angle, I would challenge any random group of RIAA lawyers, copyright judges, or members of Congress to listen to a digital recording of our radio station and a high-quality cassette recording of an analog FM station and tell which was which. I guarantee that they could not. The differences in quality are too subtle for all but the most discerning listener to notice.

The quality jump between AM and FM broadcasts was an order of magnitude more significant, yet the music industry managed to thrive their way through that transition. The advent of decent-quality cassette recorders in the 70s, coupled with stereo FM broadcasting, made it possible for anyone who wanted to to make copies of their favorite songs from the radio, with a quality not too different from the analog LPs sold at the time. Did that spell a death-knell for the music industry? Not hardly. The 70s and 80s saw a phenomenal growth in the sales of LPs and, later, CDs.

Ah, but the music industry thought that home music recording would destroy their sales, and lobbied unsuccessfully in the 1970s to cripple that technology. The same fear-based and misguided reasoning popped up again in the 90s, with the advent of digital recording and broadcasting, and this time the industry - flush with dollars earned after their earlier fears were proved groundless - succeeded in this attempt to preserve their bottom line at the expense of, well, pretty much every one else.

Crippling an exciting, groundbreaking industry like Internet radio is certainly not in the best interests of the public, nor that of musical artists, and not even - if history is any judge - of the music industry itself. Just as they were unable to see how the advent of home music taping actually spurred the sale of LPs and CDs, they are unable to tell exactly what impact Internet radio and other forms of digital media will have on the future of their industry - and to behave as if they do know, and for Congress to go along with them, is a grave error, and public disservice, that needs to be recognized and corrected.

So, if we are building a business - even a non-commercial business like Radio Paradise - by the use of copyrighted material, isn’t it fair that we pay for its use? Perhaps it is. But the fact remains that what we are doing does not differ in any substantive way from what a company like Clear Channel is doing, and to move forward under the fiction that such a distinction exists is neither fair nor rational.

Perhaps the most equitable solution is for all broadcasters - analog or digital, terrestrial, satellite, or Internet - to pay such royalties equally, just as they all pay more or less equally for the use of music compositions. This is the situation in many other places in the world, including most of Europe. The fact that the US broadcasting lobby has successfully out-spent and out-maneuvered the music industry on this issue should not be “balanced” by Internet radio royalty rates so high that they cripple that entire industry.

That kind of reform will take some time - time that people like my wife and myself just don’t have. We are hoping that we can, along with a small group of other independent webcasters, negotiate a separate settlement with the RIAA, similar to the one we negotiated in 2002. That agreement allowed us to operate by paying a royalty equal to 10% - 12% of our gross income in performance royalties. That has been enough of a burden for a struggling “mom & pop” operation like ours, but it has allowed us to survive since that point. However, that agreement has expired, and we are now liable for royalties, retroactive to the beginning of 2006, that are equal to approximately 125% of our income.

Trust me, it has been difficult to write those checks knowing that the foundation that the entire royalty structure is based on is a lie. Perhaps we will succeed in negotiating a new deal with them. If we do, it will probably be at a significantly higher rate - creating even more of a burden on small businesses like ours.

My question is this: why should we continue to be penalized for the mistakes made by Congress back in the 1990s?

MEANWHILE, a commenter Sunday to a Wired magazine blog post laid out what such a blatantly onerous ruling means for him and his webcasting business:

With my current properties and listeners I would end up paying $100,000.00 a month to stream. That's just to Sound Exchange!! This is the MOST outrageous ruling I have ever seen in my life. 60 Million Internet Radio listeners ever day are streamed, I don't think they are going to be too happy when their favorite stations go away. The whole thing is depressing and I personally have around 20,000 listeners currently. So for me, this will be the end if something isn't done to fix this. I know of 50 different broadcasters that are going to file Bankruptcy as soon as they can over this. It's a damn shame, we work SO hard 24 hours a day sometimes to break even with the current rates, and now they want a whole year of retroactive money! That for me will be the end, if I have to do that. I'm not looking for sympathy, just want people to know that its really hitting everyone hard. The trickle down effect will be tremendous. I can see Cogent Corp. going down, Small Hosting companies, digital music sales will be generated from out of the country, Amazon.com will loose tons of revenue. The measuring and stats companies will die. Andomedia, Webcastmetrics, and thousands of other companies based in the USA will go under. I hope we can do something about this. I'm beside myself, don't know what to do. Have a family and will have to work somewhere else and start over at a late age. It's horrible. Hope everyone can write their congress reps or let the CBR know what they have done.

LAWS WHICH ALLOW the big and powerful to target and victimize the small and relatively powerless are inherently immoral and unjust. This applies to human relations, and this likewise applies to free expression and commercial activity.

To quote the Rev. Martin Luther King Jr. in his Letter From Birmingham Jail:

One has not only a legal but a moral responsibility to obey just laws. Conversely, one has a moral responsibility to disobey unjust laws. I would agree with St. Augustine that “an unjust law is no law at all.” . . .

We presently face a situation where an American government professing to be "of the people, by the people and for the people" is anything but. Successive Republican -- and Democrat -- administrations and Congresses consistently have placed the interest of transnational corporations above the well-being of average Americans, not to mention vulnerable and poor Americans.

This pattern naturally has extended now to regulation of Internet broadcasting. Under the present unjust regulations and onerous fee structure, Clear Channel (or NPR, for that matter) will have the clout and the resources to cut a deal.

You won't. And I sure as hell don't.

So where does that leave us?

MY SUGGESTION for an initial way to fight back is to starve the bastards. In this case, the "bastards" would be the Recording Industry Association of America. This is the organization representing all the big labels, and this is the organization that was pushing the Feds to bleed the last drop of cash flow from the Internet radio industry.

It's also the organization suing college kids into oblivion for illicit music downloading.

The way to "starve the bastards" is to cut off THEIR cash flow. Don't buy their stuff.

Of course, that also would "starve" the good (independent music retailers, for example) along with the bullies. So, to mitigate the damage to places like Homer's in Omaha, I would suggest not buying any new music (unless it's on small, local labels) but buying the hell out of used CDs and used vinyl, which a great many independent music stores also deal in.

That way, money flows to the retailer but not a penny to the avaricious executives hiding in the shadow of their corporate lobby, the RIAA.

FIGHT. Fight now.

Big Brother is closer than you think.