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AccuRadio's statement to the Senate Judiciary Committee
·Jul 29, 07:52 AM
Posted by: Paul Maloney


400 N. Wells, Suite 408 | Chicago, IL 60610 | 312-527-3879

Written statement of Kurt Hanson, CEO, AccuRadio.com


A Statement for the Record of the July 29, 2008 Hearing on “Music and Radio in the 21st Century:  Assuring Fair Rates and Rules across Platforms”, U.S. Senate Committee on the Judiciary.

My name is Kurt Hanson, and I am the founder of AccuRadio.com, a relatively small but well-respected webcaster offering consumers over 320 channels of rock, pop, jazz, country, R&B, classical, Celtic, Broadway, indie rock, cabaret, hip-hop, pop standards, Christian, salsa, and more, with an audience of over 300,000 listeners per month. Senators, I appreciate the opportunity to make a statement to your committee.

Before Congress considers extending a sound recordings performance royalty to broadcast radio, I urge you to consider the incredible damage that a similar a royalty is doing to the medium of Internet radio.

Internet radio is a valuable medium

The medium of Internet radio, most observers agree, is one of the best things that has happened to the music industry, especially to working musicians and independent record labels, in decades.

Exposure on Internet radio is helping dozens of genres of music – and tens of thousands of performers – get airplay, gain fans, and sell records. This vibrant medium, which according to Arbitron already has over 33 million monthly U.S. listeners, has been enthusiastically embraced by musicians and labels around the country and the world.

Internet radio is on the brink of extinction

Nonetheless, Internet radio is on the brink of extinction due to a flawed standard in the DMCA, the subsequent Copyright Royalty Board decision on performance royalties, and the unwillingness of Sound Exchange to negotiate a viable compromise solution.

As you know, broadcast radio pays no royalties for the sound recordings performance, and cable radio and satellite radio pay only about 7.5% of their revenues for that royalty. However, under last year’s Copyright Royalty Board decision, in the current advertising environment webcasters are required to pay in the range of 75% to 200% of revenues for this one royalty obligation!

The damage is particularly severe for AccuRadio’s class of webcasters, which we call “Small Commercial Webcasters“ – those of us who are more than hobbyists (as we have employees, offices, and reasonable business plans) but lack the deep financial pockets of large corporate parents such as Yahoo! and Clear Channel or those firms that have raised millions of dollars in venture capital funding.

For almost three years now, the Small Commerical Webcasters have been trying to negotiate a fair royalty rate with SoundExchange. Aside from their making a non-negotiated, unilateral offer for a brief period a year ago and one subsequent day of meetings, we have been rebuffed by SoundExchange consistently, and despite their assurances to Congress last summer that they would negotiate with various classes of webcasters in good faith and in a timely manner, we have never received a counteroffer to our proposals.

As a result of this royalty crisis, AccuRadio’s audience has leveled off, its revenues have been declining, and its ability to raise investment capital has been decimated. Like most webcasters in our class – and perhaps like the larger operators as well – we will be driven out of business without a negotiated solution (or a fix from Congress) soon.

Consider Internet radio before extending royalties further

In the Digital Millennium Copyright Act (DMCA), Congress extended a sound recordings performance royalty to the medium of Internet radio and instructed the U.S. Copyright Office to set a royalty rate using a new standard called “willing buyer / willing seller.”

That instruction is at the heart of the Internet radio royalty crisis, as it is an almost impossible-to-implement standard. (A royalty rate of 200% of revenues cannot be what Congress intended, can it?) By contrast, the traditional 801(b) royalty-rate standard balances the interests of copyright owners, copyright users, and the general public.

Given the crisis in Internet radio, I would urge the Judiciary Committee not to consider extending a performance royalty to an additional form of radio – and certainly not with that “willing buyer / willing seller” standard – until the Internet radio situation is resolved.

Saving Internet radio would inure to the benefit of webcasters, musicians, and consumers alike.

Sincerely,

KURT HANSON

CEO
AccuRadio.com



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Comment

  1. Mr. Hanson,
    Thank you for keeping the pressure on for all small webcasters. The Radio Underground Vermont salutes you!

    Arty LaVigne · Jul 30, 02:19 AM · #

  2. Mr. Hanson, your letters are always well written and provide clarity to what can be a confusing situation/issue at times. After reading the transcripts of yesterdays hearings, I became very upset after reading Senator Feinstein “brushed off” the points that Mr. Kennedy was making simply because she was not “familiar” with the 801(b)1 standard. Internet radio IS doomed if the Congressional leaders who are put in charge of these types of hearings discard legitimate arguments and facts out of ignorance and don’t bother to fully understand!

    Jean-Paul · Jul 30, 08:09 AM · #

  3. Dear Mr. Hanson,

    Thank you much for your informative and insightful articles.

    Upon reading Senator Feinstein’s asserting that she was not familiar with the 801(b)1 standard, I found myself becoming rather discouraged. However, I cannot say that her words surprised me, as she was one of the prime movers of the DMCA, which discriminates against Internet radio in the sense that, while it accords satellite radio the fairer and more sensible 801(b)1 standard, it imposes on Internet radio the harsher and more stringent “willing buyer and willing seller” criterion, which is based on conditions called market prices, which in turn are as malleable as they are ambiguous.

    The 801(b)1 provision is infinitely fairer, because it makes an attempt to balance the interests of copyright holders, copyright users and those of the general public.

    Thus, it is understandable that Ms. Feinstein would aver that that she is not familiar with this provision of copyright law.

    These are some references I found particularly helpful:

    http://www.zeropaid.com/news/6371/Sen.Feinstein+for+RIAA&+MPAA+in+2006,+Not+Consumers

    http://www.opensecrets.org/politicians/industries.php?cycle=2008&cid=N00007364

    With respect, the aforementioned do not constitute ad hominem arguments. It is clear they represent facts that relate to these issues.

    Charlie · Jul 30, 08:36 AM · #

  4. Dear Mr. Hanson:

    Thank you for your passion and determination in being one of the voices that keeps independent broadcasters like me on the air. I have been a loyal broadcaster on Live365.com for over five years and have gained a small following of listeners who love the eclectic mixes, independent programming, and “retro” fun hits of yesterday. I appreciate RAIN as a source to keep up with what is happening in the Internet radio debate. Please call on me at any time if I can be of assistance.

    Best wishes,
    Kathryn Shut /shoot/
    “RetroXana”
    http://www.RetroXana.com

    RetroXana · Aug 18, 04:11 AM · #

  5. Tell me if either of these is correct:
    (1) If we don’t webcast any Soundstream artists, or make a private arrangement with an artist, we don’t owe Soundstream a dime.
    (2) They have no jurisdiction outside of the USA and territories.

    If so, if the very nature of webcasting is innovation, new artists, and self-promotion, we will only program non-big 4 monopoly artists, use self-produced recordings, or archival music beyond their reach
    (2) We will relocate and stream with an aggregator in Russia, Hong Kong, Dubai, or the Grand Cayman Islands, and pay them nothing.

    The monopolies have consistently ignored the law of unintended consequences. Why should we believe they will not continue to do so?

    Ken Rosen
    Vinyl Gold Radio.

    Ken Rosen · Aug 22, 12:18 PM · #

Commenting is closed for this article.


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