The Empire Strikes Back


The latest positioning tag line from The Globe (the new “Green” radio format in DC I wrote about a while back) is a little closer to the mark: “Corporately Owned, Listener Monkeyed-Around With.” Bad grammar aside, I’d argue that at least half that statement is factual – and it’s the corporate owners who have been doing the messing around recently – with three big news items in the last three days that suggest that the Old Order is not going to gently into the good night.

First was, the $12.5 million – in the words of FCC Commish Ken Adelstein “The largest collective fine in the history of American Broadcasting” that the Globe’s “good guy” owners CBS Radio (along with their friends Entercom, Clear Channel and Citadel Broadcasting) ponied up to the FCC to make the payola charges go away. Not that they actually admitted to it or anything. Sample grab from the Washington Post story:

Andy Levin, Clear Channel’s executive vice president, said in a statement that his company has “devoted tremendous resources” to preventing payola at its stations. “While no violations were found,” he said, “we are pleased to announce that Clear Channel has agreed to settle this longstanding payola investigation with the FCC. We believe it is time to close the door on this ongoing inquiry and move forward.”

The other three companies declined comment or did not respond to requests for interviews.

Aside from paying the fines to the FCC, the four companies have agreed to give about 4,000 hours of air time to small record companies and local artists. “This is a new opportunity for fresher, newer artists to be heard on the radio,” Adelstein said.

Right. Clear Channel pays $3.5 million to the Feds because they are doing their part to ease the budget deficit. And just where do you suppose those 4,000 hours of air time are going to fall? Sometime between midnight and six, do you suppose?

So, taking Mr. Levin’s advice, let’s “move forward:” Second was the Copyright Royalty Board ruling on Internet radio, which is similarly mind-boggling. Today’s Wall Street Journal has the most comprehensive story in the mainstream press about what this obscure Congressionally-charted agency has wrought: nothing less than a protectionist nod to those “good guys” in the above paragraph. You can read the entire report here. And it whacks public radio’s Internet music activities as well, which previously had been negotiated under a separate deal. Great. Take one of the few areas of growth and innovation in the broadcasting biz and make sure you suffocate ’em. THAT’ll show ’em! THAT’ll keep people tuned to my Clear Channel station! You need to be a subscriber to read beyond the opening grafs; here are a couple of key lines from the rest (hey, I bought my copy in the newsstand!)

…The board’s new rates appear to be those sought by the largest industry group, the Recording Industry Association of America. But the Internet radio broadcasters say the rates hit one of the few bright spots in the moribund music busienss and thus end up shooting the labels in the foot.

The new schedule highlights an inequality that has rankled many online entrepreneurs for years. Regular radio stations don’t pay any royalities to song performers for their over-the-airwaves broadcasts, although they do pay royalities to composers and songwriters. “It’s flat out unfair,” says Jonathan Potter, executive director of the Washington-based Digital Media Association.

How unfair? Under the old system, most Internet broadcasters could be a percentage of revenue – about 12% – to a copyright collection agency called SoundExchange. But no more. In it place: a new system where each station pays .0762 per listener, per song (retroactive to 2006) – a rate that will double in the next three years. Kurt Hanson’s Radio and Internet Newsletter has become sort of the “Central Command” for the Internet broadcasters up in arms about the ruling – and he says the new royalty schedule will mean his payments for his Accuradio service will balloon from $50,000 per year to about $600,000. Check out Bill Goldsmith’s blog at Radio Paradise for a reasoned, if impassioned view of what this means for the immediate future of his excellent service. Sample Grab:

The performance royalty rates released by the Copyright Board on March 1, 2007 are not just extreme, not just burdensome. They are a death sentence for all US-based independent webcasters like Radio Paradise, SOMA-FM, Digitally Imported, and many others…

Let’s reassess that reasoning in the light of 21st-century reality. Is there, in truth, a fundamental difference in the experience of an online listener to Radio Paradise and someone who was listening to identical programming on an FM station? Every one of our listeners – indeed, anyone who has ever clicked on a webcast as background music while working – knows the answer to that question. No! There is no difference whatsoever. Radio is radio, whether it comes in digital or analog form.

Just to underscore Goldsmith’s point, there are 50 million listeners in the US to online radio services (WSJ figures); 14 million to satellite radio. And is this happening because the publishing industry is broke? That brings us to news item number three: ASCAP Reports Record Revenue, Royalties in 2006. Yes, that’s right – record revenues. Highlights:
Overall revenue: $785 million – up 5 percent
Overall royalty payments: $680 milllion – up 5.3 percent
Payments by radio: $22 million – up 11 percent

And the kicker, courtesy of Digital Music News:

Meanwhile, ASCAP also gained $13.8 million from internet-based and wireless licensing agreements, a gain of 70 percent. The group is planning aggressive moves ahead, including a recent push to extract performance royalties from paid downloads. Predictably, that has drawn the ire of online music providers, represented by trade body DiMA.

Remember, that 70 per cent gain from internet and wireless providers came before the new Copyright rates were announced. Clearly the old system wasn’t working, eh?

Last word (for today at least) that wraps all three of these subjects together goes to Jerry Del Colliano’s Inside Music Media:

Hypocrisy #5 :

If everyone was so concerned with fresh music, new artists and the health of indie labels, they’d be fighting the new Internet royalty rates that threaten to impede the growth of Internet radio by charging small operators more money than they can afford to play the music.

Who is kidding whom? 8,400 half-hours when no listeners are listening to terrestrial radio or building Internet radio as the lifeline for music diversity.

Does anyone question the pervasiveness of the Internet?

Is it that hard to believe the Internet will be on everyone’s mobile devices once WiFi becomes universal?

If you’re with me so far, can you see the hypocrisy of letting four serial offenders of music diversity off the hook for chump change and a kiss on the backside while the big crybabies in the music industry try to get blood out of the one stone that will outlive them — Internet radio.