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RAIN 6/5: Webcast royalty debate heating up again on Capitol Hill, in the media

Posted on: 06/05/2008

PANDORA’S KENNEDY TAKES FIGHT TO WASHINGTON: Pandora chief executive Joe Kennedy has traveled to Washington D.C. three times to personally lobby against the performance royalty rates set by the CRB. With him, Kennedy brings a Sirius Stiletto 100 Portable Satellite Radio, a device that plays music through satellite and Wi-Fi connections, as an example of the discrepancy in royalty rates. “It’s the same station, the same songs…it’s absolutely absurd,” he said. Kennedy tells L.A. Times blogger Jim Puzzanghera that under the new ruling, Pandora would pay $18 million a year in royalty fees. That’s 70% of the site’s revenue according to Kennedy, compared to satellite radio’s 6%. Read the full article here.

RAIN ANALYSIS: Pandora remains a member of the Digital Media Association (DiMA), which represents large webcasters to Washington in the ongoing royalty debacle. Anyone who’s met Kennedy or heard him speak at the RAIN Summit (or elsewhere) would be encouraged by his advocacy on Capitol Hill for not only his company, but the industry. — PM

WEBCAST EQUALITY MAY SURFACE AT DC RADIO ROYALTY HEARING: The House subcommittee on Courts, Internet and Intellectual Property will hold a hearing on June 11 concerning the proposed music licensing royalty for broadcast radio. The record industry is advocating such a royalty (which radio stations would have to pay on top of ASCAP, BMI and SESAC) based on the “parity” argument that broadcasters should be made to pay copyright owners just as Internet radio, satellite radio and cable radio pays. In light of this, look for the webcast royalty issue to rear its head, as webcasters have argued against their royalty structure that has them paying fees excessively higher than those of other radio platforms (see today’s story on Pandora’s Joe Kennedy). For more on the story head to Taylor on Radio-Info here.

SOUNDEXCHANGE CLAIMS INTERNET RADIO BOOM, DESPITE NEW CRB RATES: SoundExchange, the organization that collects and distributes digital performance royalties, released a press release late yesterday (here) decrying those in internet radio who claim that the new royalty rates set by the Copyright Royalty Board (CRB) are hurting webcasts (RAIN coverage here, here, and here). Comparing these broadcasters to the boy who cried wolf, executive director of SoundExchange John Simson points to surging growth—citing a Bridge Ratings report that projects Internet radio advertising revenue at $20 billion by 2020 and an estimate by JP Morgan reporting $500 million in ad revenue during 2007. SoundExchange claims that the CRB’s decision provided “certainty for the webcasting industry,” allowing broadcasters to create “business plans with confidence knowing the cost of the music.” Said Simson, “Webcasters should not be drawn into that zero-value mindset that says music – and by extension, the people who create it – have no value, especially when the private sector is recognizing that value.”

RAIN ANALYSIS: Typical SoundExchange nonsense here in that they make a sweeping generalization about webcasting (“Business activity… has surged”) and then fail to back it up with anything substantiative. In fact, a lot of what Simson says here is plain misleading. First, “the sin of omission.” Simson implies that all of this supposed growth in Internet radio since the royalties went into effect shows that the higher rates aren’t harming the business. What he conveniently omits is that a significant segment of webcasters — those most vulnerable to the steep royalty hike — aren’t yet paying the new rates (see today’s article about Pandora). SoundExchange promised Congress that it wouldn’t enforce the new rates while negotiations continued (RAIN coverage here) (which, according to SoundExchange, they do). So the notion that the webcasting industry is operating profitably under the new rates is simply false. Second, SoundExchange’s leading point of evidence showing webcasting’s growth is two forecasts (in other words, not “the on-the-ground reality” as the press release claims). The first (Bridge Ratings) attempts to predict revenue in 2020; the second (JP Morgan) presents a number JP Morgan analyst John Blackledge himself later qualified and revised (RAIN here). Third, the logic of the press release is undermined by the simple fact that “business activity” is not synonymous with “growth” or “health.” Broadcasters, faced with dire uncertainty of their traditional business model, are most definitely stretching out to find new revenue channels—including expanding their brands digitally. That, by no means, indicates that the space is already profitable (any more than record labels’ recent investments in online companies indicates that all is hunky dory with the record industry; or for that matter, the idea that “increased business activity” in the home mortgage industry is a sign of that sector’s health!). Finally, the reappearance of one of Simson’s favorite strawmen — the idea that webcasters are arguing that they should pay no performance royalty — is disheartening. The webcasting industry solidly supports the Internet Radio Equality Act, which would have Internet radio paying royalties similar to cable and satellite radio, and still far higher than broadcasters. To imply that webcasters want to deny performers a royalty is untruthful and belies the untenable grounds of SoundExchange’s position. — PM

ESPN RADIO BLITZES HD: ESPN Radio will launch HD programming on June 7, first broadcasting the UEFA Euro Cup 2008 soccer tournament. ESPN will make available customized HD content to its affiliates “with a menu of options to generate local content.” Said Traug Keller, ESPN SVP/Business Units, “Offering content by utilizing new technologies and new distribution channels is part of our overall strategy of serving the sports fan.” For more coverage read ESPN’s press release here.

YIDSUN WI-FI PLAYER HOLDS 10,000 PORTABLE STATIONS: The Yidsun Wi-Fi 810 player boasts an included 10,000 presorted internet radio stations, 250 of which can be saved as favorites. While not battery powered, Yidsun is advertising the player as a portable internet radio experience. With SD memory card compatibility up to 16GB, the player can also become a sizable mp3 player. No word on pricing yet.

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  1. Here’s a question for you:

    Why isn’t the RIAA itself making these arguments on behalf of it’s members? Isn’t SoundExchange SUPPOSED to be an impartial party, whose sole responsibility is collecting and distributing royalties rather than a party that aggressively lobbies and manages a public campaign of misinformation? I thought their charter specifically prohibited lobbying.

    David Young · Jun 6, 03:21 AM · #

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