Scott Thill

July 30, 2007

It’s a marriage made in heaven. But, as usual, the Recording Industry Association of America, infamously known as the RIAA, is taking that marriage straight to hell.

I’m talking of course about Internet radio, the perfect platform for distribution of creative expression around the world, one offered at a low cost that made conventional radio a thing of the past. A mere decade ago, if you were looking for a radio station that rotated anything except mainstream Top 40 playlists, you were left out in the cold. Well, as far as radio was concerned, that is. Fans of pioneering P2P sites likes Napster kept everyone else well-fed on a steady diet of easily downloadable music catered specifically to their tastes, which they then plugged into any number of players for even easier listening. But those looking not to download but only to listen to something different than what they could have on increasingly consolidated standard radio networks didn’t have much of an alternative.

But that was before Internet radio went supernova. As more and more web-savvy publishers started building their own sites and playing whatever they felt like playing–even a nonstop rotation of Christmas tunes–mainstream radio, and the music industry along with it, went belly up with irrelevance.

The question begged to be answered: Why should listeners be straitjacketed into formats they want nothing to do with, when they could log on to any indie webcast, like the thousands that could be found on Live365 and similar netcasters, and listen to exactly what they were looking for? Better yet, why would they ever buy a CD again, when not only is it a precious waste of plastic and paper, but altogether narrow compared to the massive playlists they can beam directly to their stereos from their iPods or other portable players? Why, in the end, would they ever go back to the major labels and mainstream radio at all?

Here’s an easy answer: Because they are forced to. That has been the modus operandi of the RIAA ever since they nailed Napster to the wall. Their next target, dear listener, is you, and they’ve spent no shortage of millions to convince you that, rather than a passive user and promoter of entertainment, you are a criminal worthy of prosecution. As the popular blog Recording Industry vs. the People puts it, the RIAA’s strategy is nothing less than to “monopolize digital music by redefining copyright law, through the commencement of tens of thousands of extortionate lawsuits against ordinary working people.”

So much for the customer is always right. That strategy has come to fruition with the recent rise in rates promoted and governed by SoundExchange, a so-called nonprofit formed in 2000 by the RIAA that nevertheless collects royalties for copyright owners and featured artists for digital transmissions across satellite and Internet radio. A March ruling by the Copyright Royalty Board (CRB)–a panel of three judges named Stanley Wisniewski, James S. Sledge and William J. Roberts–raised royalty rates to astronomical heights. After sifting through 48 days and 13,288 pages of sworn testimony, from net radio webcasters and those who listen to them to the RIAA and its supporters, the three judges raised rates so high that they can exceed the actual revenue of the webcasters who pay them, a conundrum dismissed by the board as bearing no relevance to the market value of the rights held by the copyright holders. In other words, indie netcasters are priced out the market, while mainstreamers, whose pockets are lined with label and RIAA cash, are given unfair advantage. San Francisco’s SomaFM’s rates went from $10,000 in 2006 to $600,000 in 2007, even though their revenue stream is capped at $125,000. That all-Christmas station mentioned earlier? Shut down for good.

“It’s all about market power,” explained Live365 spokesperson Rod Hsiao. “CD sales have plummeted 20 percent this year, so the big four music labels–Universal, Sony-BMG, Warner, EMI–are scrambling to boost revenues by increasing performance royalties from Internetradio. The new CRB rates would put Live365 and our 10,000 webcasters out of business.”

“The rates and fees handed down by the Copyright Royalty Board would absolutely, unequivocally render Internetradio in its current form a nonviable business,” added SaveNetRadio Coalition spokesperson and Qorvis Communcations director Jake Ward. “The issue at hand here is how much is too much? Where is the line of diminished returns? Because when webcasters go out of business and play fewer artists less often, then no one benefits. And the rates that were enacted by the CRB do just that–push us over the line.”

Given that the Big Four currently own around 80 percent of all copyrighted music, it’s not hard to see who is looking out for whom. And sure enough, according to SoundExchange member Jay Rosenthal, it is the RIAA who’s battling cleanup for the Big Four and looking to take Internet radio six feet under. “To some this may sound crazy, but I sincerely am starting to hate the Internet,” Rosenthal wrote in the L.A. Times. “I know you see the Internetas some incredible invention that has opened the door to unlimited distribution of music … but all I see is a tidal wave of artist abuse.”

Yet evidently, Rosenthal, SoundExchange, RIAA and the Big Four are not mad enough to stop that abuse by webcasters who are willing to play ball. Just as the rates for the 2006-2010 license period were set to go into effect on July 15, a reprieve was offered to netcasters who, as SoundExchange’s executive director Jon Simson explained on July 12, “want to comply with the law and are in bona fide negotiations with us.” He added that SoundExchange doesn’t “want those people to be intimidated. And we don’t want them to stop streaming. That’s just so long as they’re continuing to pay under the license they had.”

Sure, the new royalties will still be due starting July 15, but as Wired journalist Eliot Van Buskirk explains on his Listening Post blog, “SoundExchange will not demand payment or force them offline, since rates negotiations are ongoing.” Nice settlement, if you can get it.

“The main thing that’s happening here,” Van Buskirk wrote me via email, “is the rates are switching from a percentage of revenue to a flat, per-listener, per-song fee. That’s because online radio can be run on so little revenue, in my opinion. I think it’s a desperation money grab from the labels, which see technology companies like ISPs, music sites, P2P software, hard drive manufacturers and disc drive manufacturers as having profited unfairly from music. It almost feels like a revenge move.”

Whatever the move or motivation, most webcasters and those who write about them pretty much agree that the CRB’s collusion with the RIAA will cost not just indie radio but indie artists dearly. If the Big Four own 80 percent of copyrighted music, then the only thing they have to fear is the possibility that their monopoly will erode over time and that an alternative market will pick up the slack by merging a new generation of artists ignoring the labels altogether in lieu of distributing their own work online and relying on indie netcasters to help them get the word out. Like I said earlier, marriage made in heaven. Except for that straight-to-hell part.

“If the Internet is to fulfill its promise of being a low-cost media distribution channel,” argued Hsiao, “then policymakers need to resolve longstanding, complex debates and make sure that the public interest wins out over big business interests.”

Ward agreed. “In an age where artists can compose, produce, record, promote and distribute their music without the help of a label or corporation and, quite frankly never have to leave the digital world to make a living, it is all the more important that the Internet continue to thrive as a home for independent artists.”

Great sentiment, but this is a shark’s world, and there’s blood in the virtual water. But if the RIAA, SoundExchange and the Big Four keep pushing Internet radio into a corner, everything from Newton’s theory on opposite reactions to Freud’s theories on the return of the repressed will come into play. If you can’t keep a good man down, as the aphorism goes, how in the world are you going to keep a good indie station down? Even if you kill it, it will pop up somewhere else.

“We’ll probably see a big rise in P2P usage as more legitimate sources vanish,” Van Buskirk explained, peering into a future where Internet radio is crippled into obsolescence. “Also, we might see underground radio stations that somehow avoid detection. It’s a horrible thing for musicians trying to gain exposure. When people download music from P2P, they generally go with stuff they’ve heard of, whereas Internet radio exposes–or, I should say exposed–people to new stuff. And that’s a tremendous service for the listener, artist, and label alike.”

Scott Thill runs the online mag Morphizm.com. His writing has appeared in Salon, XLR8R, All Music Guide, Wired and others.