The RIAA – They Can’t Be Serious

Noticed that the top e-mailed story from the entire Washington Post site the other today was regular radio columnist Marc Fisher’s latest Report from the RIAA front, containing this loaded handgun of a paragraph:

Now, in an unusual case in which an Arizona recipient of an RIAA letter has fought back in court rather than write a check to avoid hefty legal fees, the industry is taking its argument against music sharing one step further: In legal documents in its federal case against Jeffrey Howell, a Scottsdale, Ariz., man who kept a collection of about 2,000 music recordings on his personal computer, the industry maintains that it is illegal for someone who has legally purchased a CD to transfer that music into his computer.

The industry’s lawyer in the case, Ira Schwartz, argues in a brief filed earlier this month that the MP3 files Howell made on his computer from legally bought CDs are “unauthorized copies” of copyrighted recordings.

Huh? Ripping your CD (or vinyl, for that matter) into your PC is a crime? No wonder the music-blogosphere is burning up, and Jerry Del Colliano is hyperventilating. They can’t be serious! After all, the in the “Betamax case” (brought in 1976, ultimately settled in 1984) the Supreme Court famously said that home taping for “personal use” was OK — and thus the VCR and TiVo industry was born.

Ironically, in its initial response to the lawsuit, Sony in fact argued that the precedent of home-taping had been introduced by the cassette recorder, which was of course used for recording AUDIO only. So now the RIAA is seriously going to clamp down on the 21st-century version of this practice?

No, I don’t think they’re serious about it all. I think the clues to what’s really going on here lie in this analysis of the Betamax case by the Frontier Foundation:

It’s thanks to the Betamax ruling that the makers of VCRs and every other technology capable of infringing and non-infringing uses (e.g., personal computers, CD burners, the TiVo DVR, Apple’s iPod, and Web browsers) can continue to sell their wares without fear of lawsuits from copyright owners.

The whole article is pretty good — it really does suggest that RIAA sees another opening here to lay claim to more legal territory, and try to chip away a little more at the accursed Betamax ruling. It’s not you at home they’re after — it’s winning the hearts and minds of the Court. Doubt that anything so politically charged will happen in 2008, however…..

Somewhere, At the End of "In Rainbows…."

….didn’t lie a pot of gold for Radiohead’s “pay what you like” strategy. Give them props for trying, but as Digital Music News reported yesterday, 62% of the downloaders of the English progrock band’s seventh album (only available via Radiohead’s website) paid nada for it.

Bubkus.

Zilch.

On the other hand, that means that 38% DID pay something, so the experiment wasn’t a total bust. Average price: (according to ComScore) $6.00. But that’s a little deceptive: Turns out that in the US, the number of purchasers was slightly higher – 40% – and they paid an average of $8.05 for the album download…which means that 36% of the rest of the world paid an average of $4.64!

I think it’s too early to deem this a “success” or “failure” (I pointed out in an earlier post that mainly-classical boutique label Magnatune has been taking this approach for a couple of years now), save for the inescapable truth that the value of a recorded piece of music is being driven ever downward.

AND, I suspect that this is partly psychological, but this situation is exacerbated once the “physical product” is taken away. In other words, when there’s no old-fashined vinyl album, CD, or any other physical manifestation, just what is “it” that you’re holding in your hand?

An iPod or a cell phone, dummy. And they are selling quite handsomely, at a more-than-decent markup. So how do make any money selling music?

Jerry Del Colliano’s Inside Music Media post today puts it this way:

Some 62% of Radiohead’s fans stiffed them at the tip jar.

100% of AT&T’s cell phone customers pay them every time they text message someone.

Is it getting any easier to see the solution?

Music is priced too high. The marketplace is speaking and no one is listening.

Music for the price of a text message — addictive, compulsive and easy to collect.

Now that’s money in the bank.

In my next post: How Radiohead’s former label, EMI, is taking advantage of their Internet buzz….

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.

Content Management

The 1992 Election was won on the simple-but-effective mantra: “It’s the Economy, Stupid.” Worth remembering as people alternatively gnash their teeth, wring their hands, or go all Google-eyed over all of the geeky techy innovations of the Wired world: What actually is the stuff that we’re putting into those handy little boxes of code and shooting all over the world into fancy gadgets? I’ve noticed that Web people tend to talk about “content” as if it were a commodity, like “coal” or “rice” or “grass.” The reality, of course, is that “content” is PROGRAMMING, which involves heads and hearts and taste and passion. Reason for this rant: A great line from Jerry Del Colliano‘s Inside Music Media blog today:

The thought of a TV network as first and foremost a delivery system is as frightening as a mobile phone company being a content producer. But in our interactive day and age, smart people are making not so smart decisions.

Bingo. Subsitute the word “programming” for “content” in the above line and you have a truly scary scenario. Making good, high-quality, original programming is hard, time-consuming, and often expensive. I’d rather have my phone company fixing the miserable battery life in my so-called Smartphone then sending me a “V-cast.”

Rest of del Colliano’s post is not on this topic, but more about how the media barons are missing the point of today’s most important consumers:

The real problem is a lack of understanding of the very generation that has foisted all this change on the media barons — Gen Y? How can media barons make business decisions with implications so dire that they forgot to consult with the next generation? To get to know them a bit better is an eye-opener. It’s more than they are demanding, impatient and fickle. It turns out that they are proving to be wiser than the media barons in many ways.

Gen Y is bringing the record industry to its knees — latest example is the coming demise of digital rights management (DRM).

Gen Y all but banished terrestrial radio to being irrelevant for neglecting them and focusing on consolidation instead. They’ve got nothing against satellite radio — they just can’t afford it. And if they could, they’re waiting for WiFi to make everything that’s free on the Internet portable in their lives.

Newspapers — forget it. No young person is going to hold in their hands what they can click with their fingers and read.

Ouch! I happen to love reading the newspaper – always have, always will. But I think he’s absolutely right.

"Listeners of Tomorrow are Online Today"

After three days at the IMA‘s (Integrated Media Association) Public Media conference, followed by a day listening to new-Information Age seers Henry Jenkins, Charles Nesson, Dave Winer, Doc Searls, and Dave Weinberger at the Beyond Broadcast 2007 seminar (co-sponsored by the Berkman Center at Harvard and MIT’s Comparative Media Studies program, today I discovered this post from Jerry Del Colliano, Professor of Music Industry at USC. Can’t be much more than a dittohead on this one. Worth reading every word. Sample grab:

“….Now, it’s time to mention the killer app.

When universal WiFi or its equivalent is available and consumers can
take the Internet with them then it’s all over for radio. Ditto for
satellite radio.

That is, of course, assuming that terrestrial radio broadcasters don’t
have an epiphany soon and decide to get into the Internet radio
business. Ditto for satellite.

So far, the excuses are pretty lame.

Radio is a fading industry thanks to the misdirected major
consolidators. They’ve lost the next generation as they migrated to
their mobile devices and the Internet. So what does that say? Well, when
they are not fighting Arbitron’s People Meter or when they stubbornly
try to sell HD radio as the next big thing, they make excuses.

Can’t pay the music licensing fees to stream our terrestrial signals. It
would be prohibitive. No, it would be suicide — not to stream the
signals. Pay the fees and get your programming where the next generation
is — online.”

WHEW. And Jerry hasn’t even seen the Resco Radio application I just downloaded on my Motorola Q Smartphone. More on that in a future post.