Fundraising Update

Based on our current level of donations, it still looks like we're going to be behind $18-20,000 by the end of the year. While this is an improvemement from last month where we were projected to be $35,000 in debt, we still need your help to pay our bills this year. If you're not already a supporter, please donate to SomaFM today!

If everyone who listened regularly (there are about 150,000 of you who tune in once or more a week and have been doing that for over a year) donated just $10 we would have enough money to operate SomaFM for a couple years!

By the way, here's a breakdown with our monthly subscribers, which in October we had 1700 monthly subscribers:

$1.00/month	16.5%
$2.99/mo	24%
$4.20/mo	27%
$7.99/mo	18%
$12.99/mo	10.5%
$25.00/mo	3.5%

We bring in about $9000 a month (net, after credit card merchant fees) from our monthly subsribers, so this is a very important source of revenue for us!

Alternate sources of revenue

Graham writes in:

I was wondering, you know, I bought a fair few CD's now as a result of listening to your station. Is there no way you can get any income through that? Like an agreement with a web CD store?

We currently do this with Amazon, so if you follow our links to Amazon, we get a 5% of the sale commission, but honestly, we don't make that much money on it... usually only about $600 a month because people tend to buy used CDs there.

We're working on partnering with CDBaby as well, and we'll get $1 for each CD sold through them. We experimented with iTunes in the past, but at 5 cents per track sold, it wasn't adding up to much at all. Plus iTunes only gives you credit for the direct link tracks, where as Amazon also gives us credit for anything else bought during that "shopping session".. so if the buyer buys more CDs by the same artists, we get credit for that.

Wasn't internet radio killed last year?

KG Writes in:

I thought internet radio was killed last year. What gives?

SomaFM and most other internet broadcasters have technically been operating "out of compliance" (that is, we're not paying the royalties we are supposed to be paying). At some point, we can't keep doing this... someone will sue us for copyright infringement. SoundExchange has informally agreed to not sue any broadcasters who continue negotiations with them, that's why stations are still on the air. Other large services like iMeem and Last.FM have made direct deals with the large record labels, in most cases resulting in the "Big 4" record labels owning a part of those companies. (And with that ownership comes influence over the music they feature.)

So making a deal with the big record labels is not acceptable for most broadcasters who strive to be independent in the music they broadcast.

We have continued to negotiate with SoundExchange (the agency that collects the royalties) over the last year, and are close to a settlement. Originally, one problem was that a SoundExchange settlement would only cover their members, and not apply to all music as the CRB ruling did, unless congress acted to codify any settlements. HR. 7084 which was recently signed into law, does exactly that: it tells the CRB that they have to codify any settlement internet broadcasters and SoundExchange agree to. This is the only way we can get the royalties reduced to a reasonable level.

Internet radio is running on borrowed time. But even without a deal, big, venture-capital funded services like Pandora will likely survive in a slightly altered form: they'll have to make deals with all the major labels which will cause them to lose some of their independence. But small stations like SomaFM will be put out of business: either by lawsuits from the RIAA if we continue to operate without paying the royalty fees or more likely by just not having enough money to continue our operations after paying all these royalties.

H.R.7084 passed in the Senate!

9/30/2008 Passed/agreed to in Senate: Passed Senate without amendment by Unanimous Consent.

Good work everyone!

NAB drops opposition to HR 7084

I just got a call from Dennis Wharton at NAB, who told me that the NAB is now supporting the bill.

From what I'm reading on cnet and a few other places, NAB was concerned that they wouldn't get their own deal in time and didn't want to have web-only broadcasters get an unfair advantage over them. But a compromise they asked for was simple: extend the date of the bill to Feb 15th, 2009, and they're all for it.

No problem! The date extension is useful to other groups as well who are trying to negotiate deals, and the only possible opposition of the date extension would possibly be SoundExchange- just because they want to see this settled ASAP and not to continue dragging on.

Zoe Lofgren supporting the Webcaster Settlement Act of 2008

Zoe Lofgren (D - CA) on the Webcaster Settlement Act of 2008. It passed in the house, but still needs to pass in the Senate, and the NAB is opposing it.

Don't forget: we still need to get it passed in the Senate!

Webcaster Settlement Act of 2008 passes in the House!

Thanks to everyone who called their representatives. The Webcaster Settlement Act of 2008 has passed the house, now it's onto the Senate. We'll need to call them in the next 24 hours and ask for the support of "HR 7084, The Webcaster Settlement Act of 2008" (it's still called HR even though it's in the Senate).

Look up your Senator's phone number and call them. You can leave a voice message after hours.

All you need to say is "Please support HR 7084, The Webcaster Settlement Act of 2008, in the Senate. I support internet radio and want to see a fair royalty agreed upon."

The Senate will resume Monday morning, September 29th, and will consider this in the morning. If we leave messages this weekend, we can show that there is considerable grass roots support for it, and it will greatly lessen the impact of the NAB's opposition to it. And calling on Monday as well is a good thing to do; as there is a good chance it won't be passed first thing.

Summary & Background

H.R. 7084 contains technical amendments to the Small Webcasting Settlement Act of 2002 (P.L. 107-321) which will permit commercial and noncommercial webcasters to negotiate royalty rates and terms other than those determined by the Copyright Royalty Board (CRB) in its May 2007 decision. That decision was the basis for legislation introduced last year and is currently subject to a legal challenge at the D.C. Circuit Court of Appeals, which has, thus far, upheld the market rates and terms set by the CRB.

The principal purpose of the legislation is to facilitate a reduction in Internet streaming rates, something H.R. 7084 will permit to be voluntarily negotiated by willing parties rather than imposed by Congress. Essentially, this bill will allow SoundExchange, the organization which collects royalties on behalf of the music industry, to reach a settlement with the Digital Media Association, the national trade organization for the online audio and video industries.

NAB opposing Webcaster Settlement Act of 2008

According to CNET: NAB, the National Association of Broadcasters, is opposing the Webcaster Settlement Act of 2008:

(CNET quoting a NAB representative) "NAB has concerns related to Congress attempting to fast-track a bill introduced less than 24 hours ago that could have serious implications for broadcasters, webcasters, and consumers of music. NAB spent more than a year trying to work out an equitable agreement on webcasting rates, only to be stonewalled by SoundExchange and the record labels. We will continue to work with policymakers on a solution that is fair to all parties."

I don't get it, you'd think this would be in AM/FM's interests as well, as it will let NAB negotiate a deal and have it codified as well. This doesn't limit deals to a single, specific organization.

Webcaster Settlement Act of 2008 introduced

DiMA and SaveNetRadio announced that H.R. 7084: “Webcaster Settlement Act of 2008” was introduced, and clears a path for private negotiations to continue while Congress is in recess.

Basically this bill says: when the parties agree to a settlement, the CRB publishes it in the Federal Register, and it becomes an option qualified webcasters can elect, by re-wording the Small Commercial Webcasters provisions from 2002 to be applied to all webcasters, and for the period of 11 years from 1/1/2006.

So effectively, this will allow any SoundExchange settlement to be codified, and apply to all sound recordings, not just those represented by SoundExchange. I think is a good thing.

Trade organization DiMA (who represents the larger internet broadcasters like AOL and Pandora) says:

This bill does not affect the scope of performance rights or any underlying copyright law, and it does not impact broadcasters. It only clears the path for private negotiations to continue while Congress is in recess. It is scheduled to be considered today under Suspension of the Rules in the House.

I just spoke with John Simson and he confirmed that SoundExchange supports this as well.

Kirt Hanson in RAIN says ``H.R. 7084 is a bipartisan bill introduced by Congressmen Inslee, Conyers, Smith, Berman, and Manzullo and apparently supported by SoundExchange, the RIAA, NPR, and DiMA. It is scheduled to be considered today under Suspension of the Rules in the House.`` http://www.kurthanson.com

Here's the Save Net Radio release:

WASHINGTON D.C. –Today, Congress introduced legislation that will provide critical life support into the negotiations regarding the drastically increased performance royalties for Internet webcasters. H.R. 7084, the Webcaster Settlement Act of 2008, authorizes SoundExchange, on behalf of copyright owners and performers, to negotiate an alternative royalty agreement before the end of the year with any Internet radio service. This legislation will benefit all webcasters, including NPR, college webcasters, small webcasters and broadcasters who put their stations on the Internet. Because Internet radio royalties operate under a government license, Congressional authority is required to allow any negotiated settlement to take effect.

“Passage of this bipartisan legislation will ensure that the progress in negotiations over the last several weeks between webcasters and SoundExchange can continue and, we hope, lead to a solution that allows Internet radio to survive and thrive,” said Jake Ward, spokesperson for the SaveNetRadio Coalition. “The SaveNetRadio coalition, and the thousands of webcasters, artists and Internet radio listeners it represents, thanks Reps. Inslee, Berman, Smith, Conyers and Manzullo for their sponsorship of this critical legislation and greatly appreciates their continued attention and leadership on this issue.”

H.R. 7084 is scheduled to be considered today under Suspension of the Rules in the House. This bill does not affect the scope of performance rights or any underlying copyright law, and it does not impact broadcasters, it only clears the path for private negotiations to continue while Congress is in recess.

BACKGROUND:

A March 2, 2007, decision by the Copyright Royalty Board (CRB), a division of the Library of Congress charged with establishing performance royalty rates for “digital radio” broadcasters, increased rates for webcasters by an unjustified and unprecedented 300 to 1200 percent.

Since the Copyright Royalty Board (CRB) increase royalty rates for webcasters 16 months ago, there has been an immediate and devastating effect on Internet radio services. Three of the most-listened-to services (AOL Radio, Yahoo! Radio and Pandora) have either left the business, limited listener access to their services, or announced they are likely to shut down in the near future if royalties are not significantly reduced. Just as importantly from the perspective of the artists that depend upon Internet radio, recent Arbitron data demonstrates clearly that royalty-paying webcast listening has diminished substantially since the CRB decision.

Legislation introduced last year to correct the discrepancy between Internet radio and cable and satellite radio providers by establishing an equal rate for all digital radio – cable, satellite and internet radio – at 7.5% of revenue is still pending with more than 150 Congressional cosponsors. The Internet Radio Equality Act (S. 1353/H.R. 2060) was introduced in the U.S. Senate by Ron Wyden (D-OR) and Sam Brownback (R-KA) and in the House by Congressman Jay Inslee (D-WA) and Don Manzullo (R-IL).

The internet radio royalty issue is NOT settled, as some news sources have reported

The Internet Radio proceeding has not been settled. We are still trying to get a settlement with SoundExchange which can be approved by the CRB judges.

This ruling only applies to Section 115 of the copyright law, and covers "interactive streaming music and limited digital downloads," and it's only the royalties that cover the "composition" of the recording, not the sound recording. Interactive streaming is defined as music on demand, such as Rhapsody or Napster, and not services like Pandora or SomaFM.

Basically, this settled things for Rhapsody, iTunes, Napster and a few others; it doesn't affect streaming radio stations at all. :-( Our issue is with SoundExchange over the "sound recording" part of the copyright royalties, we already have a suitable agreement with the licensing agencies that handle the "composition" (BMI, SESAC, ASCAP).

Attorney David Oxenford discusses this in his blog:

While many press reports (at least some of which have already been pulled) have concluded that this is a settlement of the Internet Radio royalties proceeding - that is wrong. The Internet radio royalty proceeding involves Section 114, not Section 115, of the Copyright Act. Section 114 deals with a royalty paid to the performers, not the composers.

And it's not about paying the RIAA. The RIAA was on the other side of the table from the music publishers. Because Sound Recording copyright owners have to pay the composers when they release tracks (on CD or digitally). So in this case, the RIAA is the buyer, where as with internet radio, the RIAA is in the position of the seller (at least they claim to represent 80% of the sellers).

Internet radio is still in trouble. This did not solve things.

Speaking on Panel at AES show in San Francisco 10/5/08

I'll be speaking at The Audio Engineering Society show in San Francisco, Sunday October 5, 2008; 9am - 10:45am. Yes, they cruelly scheduled me for a Sunday morning time slot!

The panel is titled, "Internet Streaming - Audio Quality, Measurement, & Monitoring". I'll mostly be talking about audio quality issues and a bit about monitoring (SomaFM developed a bunch of in-house tools to monitor our streams which work pretty well).

The official description: Streaming has become a provider of audio and video content to the public. Now that the public has recognized the medium, the provider needs to deliver the content with a quality comparable to other mediums.

The Moderator is David Bialik. Panelists include Geir Skaaden, Neural Audio; Skip Pizzi, Radio World; Ray Archie, CBS Radio; Rusty Hodge, SomaFM; and Benjamin Larson, Streambox Inc.

Can Payola can save Internet Radio?

Doug Perlson writing in Silicon Alley Insider thinks that Payola can save Internet Radio from the high royalties that we currently face.

From strictly a financial-gain perspective, he may be right.

But for broadcasters looking for a long-term sustainable business, and not a short term financial gain (such as getting bought out by a larger company), this approach will not have success.

First off, "Payola" is not illegal in the net-radio space. In fact, it's already happening lots of places. The big labels have equity positions in several of the largest webcasters. You don't think those labels are influencing what gets played? Of course they do.

SoundExchange (the agency that collects the royalties for internet radio) is even encouraging this behavior, suggesting that stations work with labels to play the music that labels will let them use without royalties... except those deals are always more complex than that. (Basically, they give the labels control over what gets played. "You can use this particular music for free, only if you give x number of plays to these other tracks.")

I'm happy that some of the larger guys, like Pandora, have demonstrated their opposition to this. But many others, who are proponents of "direct licensing deals" are already playing the Payola game.

Music should be chosen on its artistic merit, not because of a opportunistic financial decision.

Payola, while technically illegal, has still been happening at AM/FM radio stations (under the guise of "independent promotion"). Many FM radio stations were so reliant on "promo money" that it was a significant part of their annual operating budgets- especially in mid and smaller markets. And while this practice has come under fire and largely discontinued just recently, many variations on the game sill exist, and you're fooling yourself if you think that labels have stopped using money to influence program and music directors.

Many people (including myself) believe that this is what has caused consumers to turn away from commercial radio: programmers were playing what they were paid to play rather than choosing the best material to play. So commercial FM became the land of the safe, proven hits of the past and the crap that the labels were paying to get played.

The people who say this would work for net radio have never been on the receiving end of the music promotion industry. There are tons of crappy records that labels (big and small) would happily pay to get played on the radio. But listeners are smart, and have plenty of options to choose what they want to listen to. They'll just start "tuning out" if this happens.