Indies need royalties too: webcasters favor indie music over major labels

http://arstechnica.com/news.ars/post/20070730-indies-need-royalties-too-webcasters-favor-indie-music-over-major-labels.html

By Eric Bangeman | Published: July 30, 2007 – 12:20PM CT

Most observers agree that webcasters have gotten a raw deal from the recording industry on the issue of royalties. A study by Internet radio broadcasters Live365 suggests that some of the RIAA’s concern about missed revenue opportunities may be misplaced, given that 56 percent of the music it streams comes from independent labels—not the Big Four of Universal, Sony-BMG, Warner, and EMI.

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In contrast, the majors are responsible for 87 percent of the music broadcast on terrestrial radio, according to data compiled by Nielsen. The disparity has led some commentators to suggest that the Big Four don’t care if the webcasters go silent over excessive royalties because of the comparatively low amount of their music streamed.

Even if the major labels aren’t raking in Internet radio royalties to the same degree that they are on AM and FM radio, the independents are benefiting given their heavy representation in the playlists of webcasters. The Los Angeles Times points out that independent labels will stand to benefit nicely from the higher royalties, should they actually go into effect.

Although the royalty hike was due to take place on July 15, SoundExchange—the organization charged with collecting royalties—decided against enforcing the Copyright Royalty Board’s new royalty scheme. Indeed, SoundExchange looked to be serious about reaching a compromise with webcasters in order to avoid Congressional intervention. Unfortunately, it quickly became clear that SoundExchange was also using the negotiations to press for DRM on Internet radio.

Data source: Live365; Nielsen

Royalties and DRM aside, what Live365’s data does not address is what consumers are actually listening to. Live365 may be webcasting 56 percent of its music from independent labels, but is that what listeners are tuning into? It may be that the other 44 percent—which accounts 87 percent of all the music played on AM and FM radio—draws more listeners.

Regardless of how well Live365’s data on the music it broadcasts matches the tastes of its listeners, it does suggest that ‘Net radio has become a very important outlet for independent labels, if only because it provides opportunities for music fans to encounter indie music. Seeing webcasters scale back their operations due to high royalties and DRM would harm independent labels by giving them one less medium to get their music in front of fans.

Teddy Thompson – Change of Heart

July 18th – David Letterman Show

Indie Music gets 4x spins on Live365 vs AM/FM Stations

www.kurthanson.com  

From a Live365 press release: “Live365 Inc. recently completed a study of its 2006 Internet radio broadcasts which revealed that nearly 56% of its broadcast  music comes from independent artists and labels and not major record labels. This statistic underscores how Internet radio helps promote new, emerging artists while also expanding musical diversity as the AM/FM radio industry consolidates station ownership and play formats.

“Mark Lam, CEO of Live365 pointed out: “Only 10-13% of AM/FM music is from independent artists and labels, so we spin four times as much indie music as AM/FM. Our 10,000 DJ’s are opening up the diverse spectrum of musical genres and artists while AM/FM program formats narrow it. I see this statistic as a genuine reflection of what music DJ’s will play when the choice is driven by what people like rather than profits.”

“The Live365 study further showed that well over 70% of all the unique songs played were from independent artists and labels versus the four major music labels.”

The Future is Internet Radio – But What Kind?

www.kurthanson.com

 From Jerry Del Colliano’s Inside Music Media blog: “It’s easy to get lost in all the drama surrounding the Congressional Royalty Board battle now going on between SoundExchange (referred to henceforth as ‘The Executioner’) and Internet radio.

“There are plenty of issues there and I don’t think they will satisfactorily get worked out in the coming months. ‘The Executioner’ wants to avoid the wrath of Congress and streamers want to wake Congress up and get them to act in the name of fair royalty rates. I see an unfortunate compromise coming that resolves nothing and once again leaves Internet radio in limbo in a year or two. But we’ll see.

“What I see for the future of Internet radio is not so much 24-hour streaming — although no question we’ll have plenty of that. I see delayed listening programs delivered by the Internet to mobile devices and computers. There will be 15-minutes shows, three hour broadcasts… The 24-hour broadcast standard may disappear.

“The next generation isn’t going to listen to radio on the go the way radio and satellite companies hope they will. These Gen Y’ers have shorter attention spans. They will waltz in and out of musical genres and content of interest…

“The big broadcaster of tomorrow — online or on land — will be broadcasting thousands and thousands of streams, not a handful of 24/7 stations. The niches will be very small indeed. I was born in Hoboken, NJ and love all things about that little town that Sinatra made famous. If there are 1,000 people like me, you could monetize that ‘station’ — something that terrestrial broadcasting could never do…

“Internet radio has been a smash hit already with lots of obstacles in its path.

“Internet radio doesn’t have universal portability (as terrestrial radio does).

“Internet radio doesn’t have a fair royalty agreement (like radio currently has but may not if ‘The Executioner’ gets its way).

“Internet radio is not run by seasoned professionals (maybe that’s an advantage in some ways).

“I’d like to see terrestrial and satellite get into the Internet radio business. I plan to. Many of my friends are moving to that space as well. Cyberspace is friendly to radio program directors.

“The future is Internet radio.”

Read the entire post at Inside Music Media.

Tell your congressman there is no settlement in process.

 http://somafm.com/blogs/rusty/

I’ve learned that people calling Majority Leader Hoyer’s (D-MD) office are being told when they mentioned HR.2060 that there is a settlement going on, and implying HR.2060 is no longer necessary.This is completely incorrect! As expected, the RIAA and SoundExchange are using the guise of a settlement to derail the passage of the Internet Radio Equality Act.

We need to let Hoyer’s office know there is no settlement going on. The RIAA and SoundExchange have not proposed a settlement, and they haven’t even acknowledged SomaFM settlement offer, and they haven’t acknowledged the NAB’s settlement offer, and DiMA (who represents larger webcasters and Pandora and Live365) isn’t even close to settling with them; as the heads of DiMA and SoundExchange (which has a board of directors majority controlled by the RIAA or RIAA member labels) are publicly calling each other liars in the press right now. Not much of a settlement in the works.

One other point: even if there is a settlement, it’s only good through 2009 and then the CRB process starts over again. HR2060 fixes this broken process.

SoundExchange: if there is a settlement being offered, make it public. And don’t make it a settlement offer you know webcasters can’t accept.

Music Money Shifts from CDs to Concerts

http://fatknowledge.blogspot.com/2007/07/music-money-shifts-from-cds-to-concerts.html

Seven years ago musicians derived two-thirds of their income, via record labels, from pre-recorded music, with the other one-third coming from concert tours, merchandise and endorsements, according to the Music Managers Forum, a trade group in London. But today those proportions have been reversed—cutting the labels off from the industry’s biggest and fastest-growing sources of revenue. Concert-ticket sales in North America alone increased from $1.7 billion in 2000 to over $3.1 billion last year, according to Pollstar, a trade magazine.

The shift away from recorded music is due in part to the recognition that touring and merchandise are more lucrative. But it may also be a consequence of internet piracy, as free downloads give music fans more money to spend on other things. Jwana Godinho, the director of Música no Coração, a concert promoter in Lisbon, thinks many music lovers have a “mental budget” that they are prepared to spend on music, and have switched their spending from CDs to tickets and merchandise.

How do musicians get compensated when their tracks can be downloaded for free? One answer is concerts. Just as musicians allow their music to be played for free on radio in order to drive more sales of their CDs, now free digital downloads work as advertising for their concerts.

Case in point: Prince.

Neither the Mail on Sunday or Prince’s camp would divulge how much the newspaper paid Prince for the right to give his album away, but it’s clear Prince was paid upfront, and that nearly 3 million Mail on Sunday readers — plus everyone who bought tickets to one of his shows — received the CD for free. The giveaway almost certainly contributed to Prince selling out 15 of his 21 shows at London’s O2 Arena within the first hour of ticket sales. The venue (formerly the Millennium Dome) holds around 20,000 people. If the remaining six shows sell out, the series will gross over $26 million.

Prince’s latest gambit also succeeded by acknowledging that copies, not songs, are just about worthless in the digital age. The longer an album is on sale, the more likely it is that people can find somewhere to make a copy from a friend’s CD or a stranger’s shared-files folder. When copies approach worthlessness, only the original has value, and that’s what Prince sold to the Mail on Sunday: the right to be Patient Zero in the copying game.

As with blogging and so many other things digital, music distribution could become a competition to see who posts things first. In a sense, music distribution would no longer be about space — it would be about time.

Prince is allowing his music to be given away for free so he can then make money from them on concerts.

Prince also takes it a step further by selling the rights to distribute the CD to a newspaper. The newspaper uses the free CDs as a way to increase readership.

The record labels are taking a different tact and attempting to get compensated when music is played on internet radio.

Almost all of America’s 14,000 or so webcast stations, which have 34m regular listeners and income from advertising, do pay royalties. For one thing, America’s traditional radio stations pay relatively little in royalties, thanks to a 1909 law that mandates fees for composers but not for performers. (Low royalties, radio stations have argued, are justified because playing songs provides performers with free publicity.)

In March the record labels persuaded America’s Copyright Royalty Board (CRB) to triple royalties for webcasters, to roughly a fifth of a cent per-song per-listener, with retroactive effect from the beginning of 2006. This will almost certainly put most webcasters out of business. They will also have to pay SoundExchange $500 for each channel they stream when the ruling takes effect on July 15th. This fee is likely to eliminate one of the most cherished features of online radio: the customised channels that listeners can concoct using software that produces playlists based on the names of favourite bands or songs. One popular webcaster, Pandora, creates customised channels for some 7m users. It cannot possibly afford to pay $500 for each one.

The quest for higher royalties may actually be doing record labels more harm than good. People generally do not buy music unless they have already heard it. Internet radio makes it easy to zero in on a preferred genre, so listeners are more likely to discover music they would want to buy. Many online stations even provide links to online music stores—free of charge.

As with all digital media, since it has no cost to distribute, you have to decide what you want to charge for and what you want to use as advertising to sell something else. As illustrated above, it might make more sense to allow music to be played on radio and internet radio for free as advertising for concerts. Overall I find the music royalty system to be bizarre in how it determines who gets compensated and when.

‘Fraulein’ songwriter dies in Texas

Thanks John for passing this one on.

http://www.tennessean.com/apps/pbcs.dll/article?AID=/20070727/ENTERTAINMENT01/70727083

By BEVERLY KEEL
Staff Writer

Songwriter Lawton Williams, known for the 1957 song of the year “Fraulein,” as well as “Geisha Girl” and “Color of the Blues,” died of a respiratory illness Thursday in Fort Worth, Texas. He turned 85 on Tuesday.

Country singer George Jones said, “He was always very, very nice and a real talent. He finished up ‘Color of the Blues’ with me, and wrote one of my all-time favorite songs, ‘Fraulein.’’’ About every third album, Jones wants to re-cut that song, which he once covered.

“He was pushing all the right country music buttons for that era,” said songwriter/producer Bobby Braddock. “He was writing songs that were unique and original and that were hard country at a time when so much country was being influenced by rock and roll and rockabilly. He was a great songwriter and he certainly was an influence on the country part of me.”

Writing just came naturally to Mr. Williams, said his daughter, Joan Dollar.

“He would just get an idea about something and then write a song around the idea,” said daughter Janet Steen. “He was writing while he was in the hospital. He was saying words to himself; you could see his mouth moving.”

Born in Troy, Tenn., the fiddler’s son was stationed in Houston during World War II. It was there he learned how to write songs from Floyd Tillman. Mr. Williams enjoyed his first cuts by artists such as Cliff Bruner and Laura Lee McBride and performed on radio stations. He began recording for Sultan and Fortune labels in the late 1940s, and later signed with Four Star, Coral and Imperial.

Hank Locklin hit No. 4 with Mr. Williams’ “Geisha Girl” and Bobby Helms’ took Mr. Williams’ “Fraulein” to No. 1 in 1957. This year marks the 50th anniversary of “Fraulein,” which was named Country Song of the Year at the 1957 Billboard and Cashbox Awards. It spent 52 weeks on the country charts and became a No. 16 pop hit.

“They called the song the Texas national anthem because it was such a great two-step song,” Braddock said. “The people who had been overseas after World War II and stationed in Germany and dated German girls identified with that song. He did the same thing for those who had been stationed in Japan was ‘Geisha Girl.’”

Jim Reeves cut “Senor Santa Claus,” Gene Watson and Joe Nichols recorded “Farewell Party” and Bobby Bare released “Shame on Me.” Williams, who recorded for Mercury and MCA, once said, “As long as country music fans want to hear traditional country music, that’s what I’ll be writing and recording.”

His last recording was on the Heart of Texas Records’ tribute to Floyd Tilman called The Influence. Williams recorded his song “It Just Tears Me Up” with Tilman.

“What we want him to be remembered for are the songs he wrote,” said Steen.

NAB Gets Behind Internet Radio Equality Act

http://www.radioink.com/HeadlineEntry.asp?hid=138685&pt=todaysnews

Saying SoundExchange has ignored its good-faith offer to settle webcast performance royalties, the NAB has thrown its “unqualified support” behind the Internet Radio Equality Act, introduced in April by Rep. Jay Inslee and since co-sponsored by 140 other House members.

The bill would set aside the webcast performance royalties set by the Copyright Royalty Board in March, replacing per-performance payments with a transitional rate of 7.5% of revenue for 2006-2010. A similar bill, also called the Internet Radio Equality Act, was introduced in the Senate in May.

The NAB said on July 25 that it made an offer to SoundExchange on behalf of its member stations back on June 6 – and has yet to receive a reply. NAB EVP Dennis Wharton said, “We are disappointed by SoundExchange’s continued reluctance to respond to the good-faith, reasonable offer put forth by NAB nearly two months ago. NAB will now turn our attention to aggressively advocating in support of Rep. Inslee’s legislation to ensure that local radio broadcasters who stream content online are treated fairly.”

Meanwhile, negotiations between SoundExchange – which collects and distributes webcast royalties – and the Digital Media Association, which represents such large-scale streamers as AOL, Live365, Yahoo and Pandora, appear to have hit a snag. DiMA last week accused SoundExchange of backing away from an offer to cap one part of the royalties — a $500-per-channel minimum fee — by conditioning the offer on what DiMA called “enforceable technology mandates that are unreasonable, unworkable and way off-topic.” These “technology mandates” apparently involve measures to prevent “stream ripping,” or copying streamed music to build a music library.

The CRB in March upped webcast royalties to .08 cents per performance for 2006, and mandated an increase to .19 cents by 2010. The rate hike went into effect on July 15 and royalties at the new rates are accruing, but most webcasters who might have been forced to shut down due to inability to pay the royalties have stayed online thanks to a July 13 agreement by SoundExchange not to enforce the CRB rates as long as good-faith negotiations continue.

Webcasting royalties: indies v. majors

http://opinion.latimes.com/bitplayer/2007/07/webcasting-roya.html

A bit of research released today by webcaster Live365 (download the news release here) adds meat to the argument that indie labels’ interests diverge from the major record companies’ when it comes to the looming increase in webcasting royalties. The company, which aggregates thousands of individual webcasters’ stations, found that more than 55% of the music played on its channels came from independent artists. That’s a hugely disproportionate share when compared to this year’s CD sales, where major labels have controlled about 87% of the market.

Webcasters have long argued that they offer a much different musical lineup than over-the-air stations, and the Live365 study backs that contention with numbers. The contrast between Live365’s 2006 playlists (see chart at left) and the music played on over-the-air stations (to the right) is stark. The over-the-air chart is based on a one-week sampling last year of Nielsen reports from 1,450 U.S. stations. The over-the-air numbers look remarkably like the CD market-share figures, which isn’t surprising; despite the burgeoning number of ways to discover music, local radio stations remain the most powerful force driving CD sales.

Live365 may not be a perfect reflection of the webcasting industry as a whole, but given the number of individual webcasters it aggregates, it’s a pretty good proxy. As the two charts indicate, independent labels and artists have a much greater interest in keeping webcasters in operation than the major labels do because the online stations give them the kind of exposure they can’t get from local broadcasters.

So far, though, indie and major labels have seemingly been joined at the hip on the issue of webcasting royalties. A board of copyright judges granted the music industry’s request for a significant rate hike, more than doubling the per-song fees by 2010. Webcasters with sizable audiences can probably afford the increase because they’re capable of selling a lot of ads. Those that can collect subscription fees are also likely to survive. And stations with small audiences can take advantage of discounts offered by SoundExchange, the royalty collection agency that represents labels and performers. That leaves mid-sized stations in a bind, with a number of them (such as Live365) saying they can’t absorb such a large increase in costs.

Although the new rates went into effect July 15, SoundExchange has promised not to enforce them against webcasters that are still negotiating deals. Should those talks break down, I wonder if indie labels will step out from under the SoundExchange umbrella and offer deals to webcasters to insure that indie-heavy playlists stay on the virtual air. Otherwise, they’ll be stuck following the major labels’ lead, despite the difference in their interests.

WSJ: Convoluted royalty world confounds fans, including Prez

www.kurthanson.com

From today’s Wall Street Journal: “Even President Bush’s toughest critics would forgive him his confusion when, at a forum in Nashville, Tenn., last week, he was asked if he would support the payment of ‘a statutory royalty to the performing artists for radio and television airplay,’ in the process,’changing our laws to align with the rest of the world.’

“‘Help!’ the president gulped, to abundant laughter. ‘I have no earthly idea what you’re talking about,’…

“As music has spilled out onto the Web, so have disagreements about how to license it. The latest of what may be many such disputes took place last month, when an estimated 30,000 Internet radio stations held a ‘day of silence.’ They were protesting new royalty rates proposed by the Copyright Review Board, a panel of three judges charged by Congress with settling on rates that would be fair to both sides…

“The more immediate prospective change involves the issue with which Mr. Bush was confronted. It involves whether record labels and performers should be paid a royalty whenever their songs are aired on the radio…

“The broadcasters have justified the exemption by saying radio play increases sales. Labels and musicians respond that the Internet is changing all of the old rules about the economic realities of music, and they have begun a push to abolish the exemption. The question to President Bush was part of the new PR offensive…

“The best any music fan can do as future disputes crop up — and they will — is to keep score of who is negotiating with whom and over what, and hope for the best.”

Subscribers can read the entire article at the Wall Street Journal online.