THE ORCHARD’S SCHOLL BLASTS SOUNDEX, FORMALLY REQUESTS AUDIT OF ROYALTY COLLECTOR’S SERVICE: The president/CEO of The Orchard, which distributes music and video to online retailers, Greg Scholl, has written the U.S. Copyright Board to request a formal inquiry of SoundExchange.
(The letter was published in Billboard here (subscription required).) Scholl accuses SoundExchange of business practices that demonstrate “gross incompetence, or intentional neglect.” Citing his own operation’s interaction with SoundExchange, Scholl says his company sold more than 100-thousand songs to which it owns rights (registered with SoundExchange), and yet has received just $31-thousand in three years. And of that figure, “…a paltry $1,119.78 matched songs we had registered. The rest encompassed royalties for songs where we don’t hold collection rights or songs we don’t even sell digitally… just completely random songs!” Though SoundExchange doesn’t reveal such statistics, Scholl says he’s figured that the agency “in 2007… brought in about $140 million but paid out less than $40 million” overall. Finally, Scholl accuses SoundExchange of being a roadblock towards finding a balance between fair copyright compensation and cultivating an environment to promote music. “At this important early stage of market development, it is critical for rights holders and webcasters to experiment and innovate, working together as partners, with a high degree of economic and transactional transparency,” he writes. “A year later, the song remains the same.” RBR has coverage of this story here.

DISCLOSURE STILL IMPORTANT FOR WEBCASTERS HOPING TO “PLAY FOR PAY,” SAYS ATTORNEY OXENFORD: Attorney and Internet radio expert David Oxenford says “legalized payola” may be a viable survival tactic for webcasters, but suggests that disclosure is still a very good idea, even for Internet-only services. Yesterday in RAIN we reported (here) on an essay written by TargetSpot CEO Doug Perlson which suggests webcasters might be able to afford high webcast royalties by accepting waivers or even cash payments from record labels in exchange for promotional plays. Oxenford (in photo) today writes that beyond specific payola laws, however, webcasters need to be mindful of both commercial bribery statutes (under which — as opposed to the payola statute — the high-profile cases involving Eliot Spitzer and 50s DJ Alan Freed were prosecuted) and Federal Trade Commission concerns about false and deceptive trade practices. Read more from Oxenford in the Broadcast Law Blog here.

PANDORA VP/SALES DISCUSSES COMPANY’S AD OUTLOOK: Cheryl Lucanegro, VP of advertising sales for Pandora, revealed some interesting ad stats to ClickZ Network columnist Hollis Thomases in an interview (here). Lucanegro said, “1 million people per day come to the site and spend two to three hours per session. During their session, users interact seven to eight times per hour; each interaction generates a new advertising opportunity.” She also said that while Pandora can serve IAB standard ad units, “most of our ads are custom solutions.” Also, Pandora’s registration process (they claim over 16 million registered users) allows them to target ads based on listeners’ age, gender, and geographical location, as well as “what we learn about the user (music preferences, mood as based on music being listened to, browser, time of day, day of week).” Lucanegro told ClickZ that an ad platform for Pandora’s popular iTunes application is coming soon, as well as a big sales push at the holidays.

RAIN ANALYSIS: Lest John Simson and SoundExchange try to use what Lucanegro reveals as evidence that Pandora can easily afford the outrageous royalties they support, it should be noted that at no point does she discuss profitability of the company — only the hopeful prospects of her department. Revenues and profits are, of course, two very different things. — PM

COMPANY TO AUCTION SHARES OF SONG COMPOSITION RIGHTS: A company called SongVest Inc., beginning next month, will auction on its web site portions of the rights to the music and lyrics of songs recorded by Garth Brooks, Aerosmith, Cher and others. Purchasers will get a share of royalties the songs generate (but won’t have a say on how those songs are licensed). In today’s Wall Street Journal (here), SongVest co-founder David Prohaska “says his company is pitching the songs as the ultimate memorabilia, rather than as money-making investments. Among the tunes SongVest is selling rights in are the ‘(Theme from) The Monkees’ and (Garth Brooks’) ‘Friends in Low Places’… Some titles are expected to fetch more than $250,000 on the auction market.”

Comment

1. There is simply too much conflict of interest where SoundExchange (SX) is concerned. Their overtly callous spin of the issues, and their tight connection with the largest labels make this situation extremely anti-competitive for many segments of the music business. All knowledgeable parties know that the Copyright Royalty Board (CRB) rates are ‘not’ market driven, fair-value standards, with a willing buyer/seller model. These rates were suggested by SX themselves, and directly implemented by the CRB. Now, with all of the whispers and rumors about an SX policy to seize as much of the performance fee revenues for themselves as possible, it is clear that they need to be removed from the process.

   What is clearly needed is an independent, transparent, corporate entity with a government regulated ‘Trust’ structure. Performance fees should be set by a classification formula that is founded in several criteria, such as average monthly listeners, overall gross revenues, and the percentage of a web station’s playlist that is dedicated to international label/artist licensing agencies.

   Larger web stations should have a ‘very slight’ financial advantage in order to avoid segmentation of assets. The job of (all) governments, concerning music performance licensing fees, are best suited to enforcing a strict ‘tracking policy’ that is applied directly through stream host companies (many host companies already do this).

   Let’s be adults here. The solutions to getting the correct amount of performance money to the right people (even to the massive labels that own so much of the music), without pushing web stations out of business, is easy. We need to create independent Trust entities, with tightly regulated tracking systems, with fees that make sense.

   Bill Wilkins, CEO
   Melted Metal Web Radio
   http://www.meltedmetal.com/

   — Bill Wilkins · Sep 11, 10:05 PM · #

2. I can’t help but be surprised that David Oxenford is suggesting what amounts to Webcasters’ total capitulation to the dictates of SoundExchange and the major labels. Furthermore, for SX to agree to this would contradict of their longstanding claim that Webcasting somehow lacks the promotional “added value” that’s always been assumed for terrestrial radio.

   It remains that Internet and satellite radio, by virtue of their ability to reach a worldwide audience, are capable of aggregating enough listeners for specialized genres that the localized reach of terrestrial broadcasting cannot. If Webcasters let the major labels dictate content, they’ll all end up playing the same homogenous, mass-market pabulum—like big-chain FM except with drop-outs and buffering delays.

   — Art Marriott · Sep 15, 02:34 PM · #

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