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Even after compromises from SoundExchange and the CRB, web radio broadcasters are not optimistic about the future

The U.S. Copyright Royalty Board’s new rates “would bankrupt us,” says Tim Westergren of Pandora, echoing a sentiment reflected widely by the webcaster community. Spurred by SoundExchange’s efforts to raise the cost of broadcasting music on the web to what is widely believed to be unreasonable levels, webcasters everywhere are vigorously fighting what may very well be their end.

In a pair of interviews with DailyTech, Proton Radio’s Jason Wohlstadter and Pandora’s Tim Westergren shared their thoughts on what SoundExchange’s revised royalties plan means to them and their stations. The CRB’s rates are “disruptive for everybody, rightsholders included: even if you increase your rates, and if it puts those rate-paying stations out of business, then you’re going to get nothing. These rates [don’t rely on the] economics of web radio,” says Westergren, “so, I think it’s a terrible ruling and one that needs to be fixed.”

Kurt Hanson of RAIN estimates that the rate increase is around 400% ... that's pretty ridiculous no matter the reasoning is,” says Wohlstadter.

One of the biggest problems, argues Westergren, was that the original talks in 1998 and 2002 were hamstrung by politics and semantics, and as mentioned before, completely disconnected from reality.  “The committee had to abide by language in the federal statute … and that language was monkeyed with.”

“The CRB just missed it,” says Westergren, “if you read the ruling and the rationale as it’s articulated by the royalty board and their subsequent followup to it, it demonstrated a complete lack of understanding of the business that we’re in. I think that there were structural problems and I think that resulted in a really flawed decision handed down.”

Not everyone is affected equally by the CRB’s changes, however. In the case of some independent stations that deal primarily with underground music, deals have been worked out directly with the labels -- many of which are run by fellow enthusiasts. Such is the case for Proton, and Wohlstadler argues that the direct approach is far more valuable to niche artists:
“I see Proton as one of the main avenues of promotion for these artists and labels. We generate revenue for them by linking show tracklists directly to store fronts where listeners can buy songs they just heard. I believe this makes the labels more money than any royalty would. In our niche over 5,000 songs are released a week, our station is one of the few promotional outlets available to labels to extend shelf life.”
Westergren also touches on the challenges from working with niche music from Pandora’s collection of over 40,000 artists:
“We have over half a million songs in our collection. On a daily basis, 94% of those songs play … Of those 40,000 plus artists, 39,000 are not being aired or have never been played on any form of broadcast radio, so it’s a real vital channel for artists.”
The important thing to remember, both stations stressed, is that they have no problems paying the royalties if so compelled provided SoundExchange asks reasonable rates and existing agreements are understood.

“My hope is that if SoundExchange comes to us requesting royalties for Artist A on Label Z, our contract in place with Label Z would take us out of any obligations,” says Wohlstadler. Web radio, according to Westergren, “needs to survive and it needs to be nurtured. Not to say it gets a free pass, but as we resolve this rate debate, we need to really keep in mind the value that it’s offering for musicians.”

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Best Thing To Do... Scream.
By marsbound2024 on 9/2/2007 4:37:21 PM , Rating: 3
The best thing we can all do is work together, create a petition, contact our senators and representatives and push the case for more realistic royalties. Of course American politics are really in the crapper, but if we complain enough, our representatives and senators will see more and more votes go down the drain and since that is mostly all that matters to them, let them know what they are losing. Make the petitions say that "I will not vote for a congressman who does not put forth an interest in the people whom he or she represents--of which many hold substantial interest in internet media. By signing this petition, I am wrapping up all of the things I would like to say at the decibel level I would like to yell them at into my signature."


I would certainly be one to agree to overthrow the current government (which is a right of mine and all citizens if they deem the current government to be insufficient), but nowadays I would be labeled as a terrorist.

RE: Best Thing To Do... Scream.
By Treckin on 9/2/2007 8:11:04 PM , Rating: 3
Although it may say that in a key federal document, the Declaration of Independence is not constitutional writ, and thus carries no weight in court or elsewhere. Notice that such an 'inalienable right' is not granted anywhere in the constitution or its mandated writs... The Declaration fails to submit the correlative right - governments have the god given right, even responsibility, to attend to their own longevity, especially in the incidence of civil unrest.

RE: Best Thing To Do... Scream.
By marsbound2024 on 9/2/2007 10:35:37 PM , Rating: 2
I don't want to be offending, but seriously, you should do some basic research before responding. What I wrote was my play on the Preamble of the CONSTITUTION of the UNITED STATES OF AMERICA. Thus, believe you me, I would not have stated it to be a right of mine if it wasn't written in the Constitution itself. And by the way, this right of mine is also in the first amendment. I hope you brush up on your basic US History and Government knowledge. :( Sorry, my purpose is not to offend, but rather to reply to a rather erroneous remark.

Please wikipedia the Preamble to the US Constitution:

By marsbound2024 on 9/2/2007 10:42:20 PM , Rating: 2
... and didn't I write in there: "do ordain and establish this CONSTITUTION for the world of America"???? How did you screw that one up?

By Webreviews on 8/31/2007 11:15:28 PM , Rating: 2
I am a big fan of Yahoo! LAUNCHcast. At work there is way too much electrical equipment in the computer areas to listen to terrestrial radio. Internet radio solves that problem. Plus I have access to many more stations that play music I had never heard before, which has turned me on to artists I had no idea existed (that was how I discovered Amy Winehouse).

I liked LAUNCHcast so much I bought the premium service in order to get the higher quality sound and the extra channels. Still, even with me paying a monthly fee, I have no idea how even Yahoo! will manage to keep their service running without hemorrhaging money.

I think the RIAA and their ilk are just trying to kill off anything they can't control in the vain hope that consumers will go back to buying records on the shelf.

Wake up, physical media is going the way of the dodo.

By TomCorelis on 9/1/2007 2:40:10 AM , Rating: 3
As long as online stores will only sell me DRM-wrapped 128kbit-encoded crap, the only media I will be rooting for is the CD. (Or vinyl :-)

By Chadder007 on 9/1/2007 3:53:46 PM , Rating: 2
Im hoping more for the death of the RIAA soon. Top 40 stations are going kaput around here. With them killing off Internet radio streams, how will they get word out of any new music?

Just pay them back
By eli2k on 9/1/2007 12:34:04 PM , Rating: 2
Hmm, it feels like, stations can just make a deal with the artists and labels, something like, hey, you realized how much more exposure artists have from our radio station, right? How about we [the station] accept the rate increases, pay the artists, and then have the artists pay us back.

Maybe a little convoluted and complicated way of solving the problem, though.

RE: Just pay them back
By James Holden on 9/1/2007 1:29:12 PM , Rating: 1
Payola is illegal in the US

RE: Just pay them back
By Targon on 9/2/2007 10:35:38 AM , Rating: 2
The RIAA isn't a government agency, so deals of that sort may be legal.

RE: Just pay them back
By m104 on 9/2/2007 11:50:58 AM , Rating: 2
didnt eminem do that - and get his ass wuped for it? i read something bout it here on dailytech

Hate these guys
By Belard on 9/1/2007 5:38:14 AM , Rating: 2
Like others, I've grown to really hate RIAA, MPAA and of course SoundExchange. Isn't people seeing the common thread of these groups who are supposed to "protect" the artist - yet many artist (Music, directors, etc) tend to not be fans of these groups... which is about money, not the actual love of music or movies. These are the same greed snobs who tried some years ago to make Used-CD shops to pay ROYALITIES for re-selling USED CDs... uh? Guys you already made yer money when ya sold it the first time!

*I* do buy CDs of bands worth listening too. I buy tickets to watch them play in concert when possible, even to drive hundred or so miles to catch some favorites. But I admit I don't buy much CDs because well... what on the radio generally sucks or its fine for radio and they play it enough.

Until I read this article above, I was NOT familer with Internet Radio... and NEVER heard of Pandora. (the band, yes). So I visited the site... OMG!!!

This is one of the best things I ever experinced from the web... and now it looks like these morons are out to kill it. I like to HEAR GREAT music, and most of it - we never hear it because the suits push a few hundred singers/groups - period... they CHOOSE what becomes popular and what people hear. There are CDs of local bands

In the past 2 hours of using Pandora - I have "discovered" the music bands I've never heard of - and learned of new songs from some I did know. The system is already impressive to me and its "Learning" what I like. So in this short time, I've learned the existance of 12 bands I would not have known about otherwise.

The interface (even the way the ad-banners work) is very well done. The system is SIMPLE, easy to use - fast and looks very good. I have added Pandora to my last open space on Opera's Speed Dial. (Try Opera, especially Speed Dial - kills IE 6 and 7 easy and more secure)

I thank you Pandora for your love of music and trying to help all these bands...

I think a good idea would be for many of these 40,000 artist to join in a class-action suit againt SoundExchange for HURTING them. Maybe that will get their attention?

Afterall... how am I and others supposed to enjoy and support these artist IF WE DON'T KNOW ABOUT THEM?!

RE: Hate these guys
By Screwballl on 9/1/2007 1:12:27 PM , Rating: 2
After playing with it for some time... I wish I could get this to stream to my wireless Linksys network music player...
I hope that players like Pandora get a nice big shaft shoved into the side of RIAA, SoundExchange and other greedy money hungry companies.
These companies aren't working in the best interest of the artists, they are working in their own interest of getting more money.

By UberDragon on 9/2/2007 10:12:26 AM , Rating: 2
This is another fine example of how the labels are forcing music into privacy and piracy. I have worked as an On-Web Personality and I have personally watched fully legit web radio stations turn underground because of these issues.

The entire reason we have "music" radio is to promote music, to entice listeners to new music, to let us know when our favorites are coming to town so we can purchase our front row seats.

When will the "industry" realize, it's about the music man! The more stunts they pull, the larger the music piracy community gets.

By imaheadcase on 9/2/2007 9:36:04 PM , Rating: 2
Won't increase music piracy since most music people don't even listen to these music sites.

I never even heard of these places till I read it here. Its not like its the end of music internet radio, lots of apps around that still let you stream still

I'll hate to see them go
By jak3676 on 8/31/2007 10:34:01 PM , Rating: 2
I gave up on main street radio long ago. I haven't bought a CD in in a store in probably a decade. I do catch the occasional tune on the radio that obligates me to drop them a few cents however.

I understand that companies out in the game to make a buck. I can appreciate a good business argument even if it goes against what I want personally. I'm not one of those people that feel everything on the web should be free, but they have to realize that this is a short term gain at the expense of a long term loss. I suppose the fight isn't over yet, but everything I read tells that it’s inevitable.

By yacoub on 9/1/2007 10:07:33 AM , Rating: 2
I've enjoyed on and off over the years, when I've worked at jobs that were conducive to listening to web radio. I've been exposed to a lot of new music through it but at the same time if it becomes a pay-only model due to this new regulation nonsense, I doubt I'd start paying for a formerly free service as it's just not that important to me. The only real loss would be exposure to new artists and that's more their loss than mine as, again, I can do without. The streamcasters know this and that's why they're fighting so hard to get a fairer regulation set established. They know most of their free listeners aren't going to start paying.

none of you get it
By teamatomic on 9/3/2007 8:47:36 AM , Rating: 2
...not a single one of you.
What is going on is the RIAA using this to ensure that EVERY single internet user pays them a monthly fee. That is every user, no matter if you even listen to music, no matter if you are even deaf.

Why do I say this?

Go search and read the Audio Home Recording Act 1992.

Note the part about royalties and digital recordable media and devices.

The RIAA wants the same thing from every Internet user. A percentage of your monthly access charges.

Get a clue. All this is just the way to get that. And what it means to the RIAA is a continuing stream of money, in perpetuim.

Shot themselves in the foot
By MrUniq on 9/4/2007 11:04:42 PM , Rating: 2
This is a big mistake. Often I do not listen to local radio because of the lack of variety and I have often enjoyed music webcasted from individuals and other stations across the country/world. Well I guess greed trumps free advertisement.

"We basically took a look at this situation and said, this is bullshit." -- Newegg Chief Legal Officer Lee Cheng's take on patent troll Soverain
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