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ARSCLIST  July 2007

ARSCLIST July 2007

Subject:

Internet Radio Status Update

From:

Dismuke <[log in to unmask]>

Reply-To:

Association for Recorded Sound Discussion List <[log in to unmask]>

Date:

Mon, 16 Jul 2007 23:09:23 -0700

Content-Type:

text/plain

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text/plain (268 lines)

Earlier today I sent the following status update out
to the Radio Dismuke mailing list (If you would like
to be on the list to receive occasional email updates
about the station or the Internet radio royalty
situation, you can sign up on the Radio Dismuke
website at www.RadioDismuke.com )

- - - - - - -

Radio Dismuke
http://RadioDismuke.com


July 15 has passed and, thanks to the emails, letters
and phone calls listeners placed to Congress, Internet
radio is still streaming - at least for now. Under
pressure from Congress, SoundExchange agreed at the
last minute to not immediately enforce the devastating
rate increases that were scheduled to take effect
today and to enter into negotiations with webcasters.

To those of you who have contacted your
representatives in Congress, you have my profound
gratitude. Please know that your your doing so DID
have an impact. I can guarantee you that the ONLY
reason that thousands of stations did not go silent
yesterday was because of the pressure Congress felt
after hearing from hundreds of thousands of concerned
constituents over the past several months.

Unfortunately, at this point, there is still much that
needs to be resolved and the future of Internet radio
still faces many potential dangers in the days and
weeks ahead. The good news is we are still alive to
fight and, now that Congress has stepped into the
picture, SoundExchange is under pressure to negotiate
honestly and in good faith - something that it has not
done to date.

Right now, the situation is very fluid and lot of what
is going on is taking place behind the scenes and is
simply unknown to most webcasters and the general
public. Based on what I have read from various online
sources, here is where things currently stand:

SoundExchange has agreed to cap the $500 per channel
"administration fee" which threatened to immediately
bankrupt webcasters such as Live365, Pandora and Yahoo
who each offer thousands of channels. The cap would be
at 100 channels or $50,000. My understanding is that
this only applies to stations that fall under the
"large commercial webcaster" category which is
determined by the size of a company's annual revenues.
Live365 falls under this category. LoudCity, however,
is classified as a "small commercial webcaster" and
will likely end up under some different sort of
arrangement.

A new bill, H.R.3015, has been introduced in the House
which would officially postpone implementation of the
new rates for 60 days in order to allow time for
negotiations between SoundExchange and webcasters or
for passage of the Internet Radio Equality Act which
would set Internet radio royalties at a rate equal to
what satellite radio pays to perform the same
recordings. Such a bill would give webcasters a
postponement of execution that is more binding than
SoundExchange's mere promise to not enforce the new
rates. Some websites are suggesting that the bill will
pass quickly while others say it stands little chance
of passing. The general consensus, however, is that
just the mere fact that such a bill is out there is
probably enough to pressure SoundExchange into keeping
its promises.

One area of particular concern to me is reports that,
in the negotiations with the large commercial
webcasters, SoundExchange has supposedly said that the
per-song per-listener rates are "non negotiable." This
ought to be troubling to the Radio Dismuke audience
and fans of niche genres because Live365 falls into
that category by virtue of its annual revenues.
Despite being a "large webcaster" Live365 is, in fact,
the home to the vast majority of the Internet's
SMALLEST radio stations. Live365 makes it affordable
for hobbyists and music enthusiasts to provide highly
specialized programing to very limited audiences that
are simply not profitable for more commercially
oriented webcasters to serve. For example, on Live365,
Radio Dismuke is only one of several stations that
feature vintage music. Weimar Rundfunk specializes in
European recordings from the 1920s though 1940s. Elite
Syncopations specializes in ragtime music. And there
are others.

Beyond the danger to Live365, my concern about the
negotiations with the large webcasters is that
SoundExchange might be taking a hard line approach
with the per-song per-listener rates in order to
pressure webcasters such as Yahoo, AOL and Pandora
into cutting direct license deals with the major RIAA
labels at lower rates. Such an approach would be a
DISASTER for independent artists. If the only way for
the largest and most successful webcasters to survive
is by dealing directly with the labels, it would mean
that it would cost such stations far more money to
play music by unknown artists and obscure genres than
it would to play mass market hits - which is the exact
opposite of what would occur under normal marketplace
conditions. It would also give the RIAA labels
considerable leverage over such webcasters because
they would always be under the potential threat of
their direct license not be renewed at the end of its
term. This would have the effect of giving the RIAA
labels considerable leverage over stations in terms of
getting airplay for the particular recordings that the
labels are especially interested in promoting at any
given time.

Congress and its constituents have already made it
clear that they will not allow RIAA/SoundExchange to
get away with killing off Internet radio completely.
My guess is that SoundExchange has already conceded
that it has lost the battle as far as killing off the
smaller webcasters is concerned and that its focus is
now on trying to at least make it so that the most
successful webcasters who have the deepest pockets in
terms of being able to promote themselves are under
extreme financial pressure to play only RIAA approved
formats and artists.

Another concern I have is that SoundExchange will
attempt to harass smaller stations out of existence by
unreasonable reporting requirements. Under the old
rates, educational institutions such as colleges paid
very low licensing fees. Many colleges, however, have
been forced to take their streams down not because of
the royalties but because they simply could not afford
the expense and hassle of keeping up with all of the
reports that SoundExchange was demanding. I have read
that SoundExchange is already complaining in the
current negotiations about the need for increased
reporting and tracking requirements.

Never forget that the RIAA's motive in this entire
mess has ALWAYS been nothing more than to kill off
what it sees as an emerging threat to the influence it
has traditionally had over which recordings receive
all-important FM radio airplay. Internet radio is
poised to replace FM radio's role as the primary
musical trendsetter in our culture. If the RIAA labels
are not able to exert similar influence over airplay
on the Internet, their days are very numbered. The
very moment it becomes apparent to artists that they
can get much needed airplay and become successful on
their own, there will no longer be any reason for them
to sign the terribly one-sided record contracts with
the RIAA labels. By bypassing the major labels,
artists will be able to retain much more control over
their artistic product and would be entitled to
receive 100 percent of all revenues that might be
derived from it. The way things are rapidly evolving,
there will soon no longer be a need for the role that
the major record labels traditionally served prior to
the advent of recent technological advances. What we
have been witnessing over the past few years is an
obsolete and dying industry desperately trying to use
the law of the land in order to carve out a relevance
and role for itself that would otherwise not exist in
a free market.

In my opinion and in the opinion of most webcasters,
the only viable LONG TERM solution to this mess,
regardless of the outcome of any negotiation with
SoundExchange, is the passage of the Interent Radio
Equality Act. If the act were passed, Internet
broadcasters would still be paying the highest
royalties of any category of broadcaster in the United
States and it would be among the highest royalties
paid by broadcasters anywhere in the world. The
advantage of the Act, is that it would provide
PERMANENT relief to the various attempts by the RIAA
to kill off webcasting as an independent industry.

Whatever may come out of the negotiations with
SoundExchange is only going to be good through the
year 2010. After that, the whole process starts over
again. The RIAA attempted to shut down Internet radio
when the first rates came out in 2002 and was stopped
only because of a pubic outcry to Congress. At this
point, it appears that the same might happen in 2007.
The fact of the matter is, however, that webcasters
simply cannot afford to have to endure this every four
years. No serious investor is going to make a
substantial financial commitment to an industry that
is under constant threat of a possible forced shutdown
in the future. Very few webcasters currently make
much, if any, profits. And yet they have been forced
to fight a battle that has been very costly in terms
of legal and lobbying expenses, staff hours as well as
lost opportunities that might have been pursued had
the webcasters been able to focus more on their
businesses than on fighting the RIAA. I have been
fortunate in that my agreements with Live365 and
LoudCity have sheltered me from such expenses.
However, even on my level, this battle has been costly
in terms of lost opportunities. For over a year and a
half now I have been more or less forced to put all of
the various plans I have entertained for substantially
expanding Radio Dismuke's audience and programing
abilities on indefinite hold until the royalty issue
has been resolved one way or another. It makes no
sense for me to sink time and money in significant
expansion when I have no way of knowing whether my
existing service providers will still be around and
whether or not I will be forced to struggle to find a
way to keep the station going at a fraction of its
present size at a significantly increased price. The
Internet Radio Equality Act would provide a long term
legal stability that the Internet radio industry has
yet to enjoy. Had such an approach been taken since
the get-go, I can assure you that Internet radio would
be far more advanced and evolved that it presently is.

Because the long term outcome is still uncertain, it
is very possible that webcasters will once again be
forced to ask their listeners to contact Congress on
their behalf before this is finally over. I will let
you know when and if any such action becomes urgent.

In other news, despite the gloomy mess of the past few
months, I have been constantly updating the Radio
Dismuke playlist. Over the past weekend, I added 60
new selections - all from vintage 78 rpms. I would
guess that over 80 percent of those new selections
have never been reissued in CD format. I have many
hundreds of additional 78 rpm recordings lined up for
eventual inclusion. The difficulty with 78 rpms is
that transferring them and digitally restoring the
audio so that it will be acceptable to modern
audiences is very time consuming so using them has to
be an ongoing and very long-term project. As of today,
Radio Dismuke currently has 1,947 tracks in its
playlist. The playlists of most terrestrial stations
are but a fraction of that size. At its present size,
it takes over 4 days for Radio Dismuke to cycle
through its playlist (I do have it set up so that
recently added recordings are played somewhat more
frequently). The current playlist features 665 unique
artists - far more than one would hear in a given week
on a typical FM station. According to one of the
Live365's employees, during the month of May, over
250,000 artists received airplay across the thousands
of Internet stations in the Live365 network. That's
about 249,000 artists who would have most likely
received NO airplay at all had it not been for
Internet radio and about 249,500 more artists whose
existence and work the major RIAA labels would rather
you not be made aware of. Internet radio is special
and, in my opinion, it is the most wonderful thing
that has come along for music and the artists who
perform it since the invention of recorded sound. It
is definitely something worth fighting for.

- - - -
Please feel free to foward this email to anyone you
think might be interested in reading it.

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