Internet radio is ground zero for breaking new music. Free of the playlist restraints of terrestrial radio stations, internet radio DJs can play any kind of music they want. As such, it is one of the first places independent bands can find an audience - and one of the last places music can make it on merit alone. That could all come to an end on July 15, 2007, when new internet royalty rates are set to come into effect. So, is this really the end of the road? Not if Live 365 has anything to say about it. Live 365 has been leading the battle to get these royalty rates repealed, so internet radio can continue to thrive. Here, Rod Hsaio of Live 365 gives some insight into the fight.
Question: You seem to have significant grassroots support for your efforts - what kind of reception are you getting in DC? How many lawmakers do you think you have on your side?
HR 2060, introduced by Representative Jay Inslee, currently has 113 cosponsors; and S 1353, introduced by Senator Ron Wyden, has 2 cosponsors.
These bills set Internet radio royalties at the same rate as satellite radio. Most lawmakers sympathize with the small webcasters who are paying a disproportionately higher share of their sound recording royalties to SoundExchange, the royalty collection agency. In fact the royalty payments exceed Live365's radio-related revenues and this is true for other small webcasters as well. There is also the issue of parity and why Internet radio pays the highest rate compared to satellite and terrestrial (AM/FM) radio. Senators have promised that these issues and the overall copyright system will be addressed--but the challenge is to get it done before the new rates take effect on July 15th.
Q: Independent musicians, labels, other internet radio stations, and many other music industry groups are totally opposed to these new royalty rates, except for the RIAA. Why do you think the RIAA wants to see this happen? Do you think they are out of touch? Have they simply come out and voiced their support for the new rates, or are they actively engaged in a fight to keep them in place?
RIAA's first interest is to eliminate illegal file-sharing and streaming of music, then secondly it wants to get more royalty paid for artists and record labels. Internet radio stations stream music to listeners instead of promoting peer to peer file sharing like Napster, Grokster, etc. We fundmentally believe that songwriters and musicians should get paid for their creative work and are happy to do so. So we're on the same side as the labels in wanting to stamp out music piracy.
On the royalty issue there is a clear division between independents and the major labels, as you pointed out. It has been hard to convince major labels in the RIAA that Internet radio does provide a promotional role equal to--or even better than--terrestrial radio because of the ease of clicking to buy music at an Internet radio station. Yet they claim that increased radio listening has diminished music purchases. That's funny because the trend shows that radio listening nationwide is declining. Nearly 90% of total radio listening is heard on AM/FM stations and that is where RIAA should be looking if they want to promote greater music sales. It's not surprising that music sales have fallen if you consider that listener choice has diminished: the Future of Music conducted a study which found that 4 station owners nationwide have nearly 50% of listeners and 15 musical formats dominate 75% of music played. Listeners are sick of hearing the same homogenized music over and over. In contrast, Live365-related music sales (both physical album fulfillment and digital downloads) are growing faster than our aggregate listening hours. We offer over 260 genres of music and thousands of stations available free to anyone with an Internet connection.
So in looking at the impact that Live365 webcasters have on music sales, we think RIAA needs to look at the bigger problem of consolidation in the AM/FM radio market. Internet radio can serve niches of musical genres and artists in a cost-effective way that benefits all labels, especially the independents, since they can't get their stuff out on the AM/FM airwaves.
We're hopeful that once the RIAA takes a harder look at Internet radio they will also recognize the value we bring to discourage piracy and help promote a greater diversity of artists, and consequently lower the new royalty rates to allow Internet radio to flourish.
Q: What happens if you are unable to get the emergency stay and eventually get these royalty rates overturned? Do you have a contingency plan to keep Live 365 operating, and if so, what is it, and how will things change?
Internet radio companies are working together to pursue a satisfactory resolution on many fronts. In addition to the filing for emergency stay filed in the DC Federal Court of Appeals, we are urging Congress to intervene, and are also seeking to negotiate with SoundExchange. But if nothing works, then we are doubtful that our 10,000 webcasters will want to pay the $500 minimum and keep their stations on the air.
What can concerned internet radio listeners, musicians, and labels do to help?
Listeners should call or send a letter to their member of Congress telling them to cosponsor HR 2060 and S 1353. Internet radio should at least have the same royalty rate as satellite, especially when terrestrial pays no performance royalties at all! Musicians and labels should let the RIAA know how they feel about letting SoundExchange bankupt Live365 and other small webcasters.
