I guess you didn’t read all the way through Russ’s post until the signature, where it says:

“Any opinions stated in this post are my own, and not that of Last.fm or CBS unless stated otherwise. Please don’t quote this post outside these forums without my permission.”

ASCAP, BMI, RIAA…are nothing more than glorified unions that work for the betterment of the group as a whole. They do not represent the entire industry. At least that’s how it appears on the outside. We all know how ‘beneficial’ unions really are. Non-members are NOT subject to agreements or laws set forth by the groups. It’s an internal problem. RIAA members were not being compensated the royalties they wanted, so they raised THEIR rates. Which they have the right to do.

If an Artist, or rights holder is not a member of a licensing group, and even if they are, they still have the right to release any royalties due. Look at the Terms for MySpace and other sites. Otherwise, MySpace would be paying the royalty rates for EVERY song (regardless the Artist) streamed through the site. The same goes for other streaming sites like PureVolume.

Back on the note of actual Internet radio stations. The ones that broadcast 24/7 like terrestrial. Unfortunately, the majority has failed to come up with a viable business model, or at least a sustainable one. With pre-roll, in-stream, and post-roll ad spots holding strong in the $10-30 CPM range…it’s not a tough one to figure out. Especially when we’re only dealing with fractions of a cent here.

These sites WILL, just as the protesting group of stations suggest, go under. Or as #2 suggested, a station could play upcoming Artists only that would be more than willing to waive the royalty, just for the exposure. I’m listening to a station right now that plays a mix of upcoming unsigned Artists, as well as major label Artists…all who have signed a release of the royalty.

A great deal of Artists and labels do this. And their willingness to do it varies depending on the outlet. If a million people are going to hear an Artists song, and the only way to get the exposure is to sign away the $7.00 Artist royalty check.

Play or pay? Which will they choose?

I’ve been logged into the last.fm website, and listening to Last.fm radio since 9am PDT without glitches or buffering.

Not sure what’s happening on your end though.

Looks like they ended up joining in the day of silence after all, even if not by their own choice.

The lesson learned is that only illegal services like last.fm and youtube that doesn’t play by the rules will ever win in the entertainment business

“Virtually every other country in the world has a performance royalty; the US does not.”

This is not true. Webcasters in the U.S. have been paying a performance royalty since 1996! It’s this kind of mis-representation of the argument that Last.FM have employed to muddy the waters in this debate. The DOS is about a FAIR rate, not no rate at all. AS an artist myself, and an owner of a label which stands to gain considerably from the new rates, I STILL OPPOSE THEM because they strangle diversity….Homogenization will be the result of this kind of action, and honestly, who wants another sector of our industry run by a small group of giant companies??

I feel it’s necessary to quote user David Young, who made clear, concise arguments against this decision yesterday on TechCrunch’s other post on the subject:

“This discussion is about the CRB rates set for performance royalties for the period of 2006 - 2010…rates which in their second, third, and fourth year (2007, 2008, and 2009) increase 37.5%, 27.2% and 28.5% respectively. How many businesses do YOU know (besides Google) that can increase their total revenues 37.5% year over year?

Of course, any number of positions can be taken, and arguments made on either side of this debate. Here’s a few points I’d like to add (possibly reiterate):

1.) The music industry is hardly in a position to lecture webcasters on the efficiency of their business models. One of the primary reasons the US music indusrty is in this situation to begin with is their failure to adapt to market demands. They chose to litigate rather than innovate, and thereby missed out on their opportunity to shape the future of music distribution in the digital era. These royalty rates are a reflection of that missed opportunity.

2.) If the performance royalty rates for webcasting are so fair, why did a separate CARP (Copyright Arbitration Royalty Panel) determined that 7.5% of revenues was a “fair and balanced” rate for Satellite and Cable Radio?

3.) Many small webcasters showed up for the CRB panel discussion, asking that they keep a percentage of revenue model. The CRB rejected ANY percentage of revenue model for internet radio, even though a previously established rate existed in the SWSA (which, btw was set at 12% of revenue for digital performances, a rate that was higher than most of the EU and Canada for performance royalties. ASCAP and BMI royalties were / are paid above and beyond the 12% figure.

4.) The “willing buyer / willing seller” clause of the DMCA is flawed language, inserted at the behest of lobbyists for the music industry, and is overly vague. Obviously, you cannot establish a rate that would have been negotiated between a “willing buyer / willing seller” in a situation where there exists no willing seller, only willing buyers. This clause puts all the power in the hands of rights holders without balancing the public interest, or allowing for economies of scale. Here’s a take on John Simson’s milk analogy.

In a willing buyer / willing seller relationship, a seller has milk for sale. He’s willing to sell it for $X. A willing buyer says he can’t sell the milk at $X because consumers won’t pay $X for it, when a competitor sells it for $Y. So, the willing buyer trys to negotiate a lower price in an effort to make up in volume what he cannot in price. If the willing seller says no…the willing buyer has the option to find another willing seller who WILL sell at $Y, and maybe even offer volume pricing discounts, while the seller that said no gets nothing (ie, loses the sale). It’s how the market works.

The problem with the willing buyer / willing seller language in this instance is that if a webcaster cannot negotiate a rate with SoundExchange, where else can they go? Who are the other “willing sellers”? The only option available is to go to the labels directly to negotiate rates…which is what deals the killer blow to SoundExchange’s argument. Unlike SoundExchange, the labels are under NO OBLIGATION to split the negotiated rate 50 / 50 with the artists. So, by forcing direct deals, artists could actually LOSE MORE MONEY than they would have otherwise received under a more fair royalty scheme.

5.) A percentage of revenue model (like that set for Satellite / Cable radio) is a win-win. Webcasters benefit by getting a rate that allows them to grow their business, receive further investment, and still compensate artists and music composers for their works. The music industry benefits because Internet radio provides access to a much wider array of music and demographics that are currently underserved or not served at all in terrestrial “broadcast” radio, which means the potential for future growth in revenue for the music industry is tied to the growth of internet radio (which the RIAA and SoundExchange contend will be exponential in the coming years). So, really, it’s only common sense. 7.5% of $500,000,000 is $37,500,000 (the $500m figure was used in the CRB proceedings as an estimate of the current value of the entire webcasting industry). 37.5% of nothing is…well, NOTHING. So, while one could argue that “businesses that don’t have an effective business model go belly up”, it would be naive to ignore the facts that, a.) These rates are established by a GOVERNMENT REGULATORY BODY, and are set arbitrarily rather than negotiated, b.) that these rates are established ex post facto, and in absence of any “real” market forces, and c.) it is in the best interest of both artists and the music industry to work with webcasters in good faith. I have yet to see where any major webcasters are asking for a “free-ride”.”

Hope you didn’t think I was insinuating that you changed your stance…that’s not what I meant.
I only found it odd that the response came so late. Surely questions about this came up from members/media/bloggers before TC’s post yesterday….and maybe it did and I just missed it..

I think Duncan and some others here and at the last.fm blog do make a good point about showing solidarity…even if you don’t agree with day of silence…which is all fine and dandy with me…some kind of recognition on the last.fm site could have gone a long way…Did it really have to be either/or? I think it was somebody at your blog that mentioned Shoutcast not participating but put up a banner to show support.

nobody is arguing that artists shouldnt be getting paid. The reality is 50% of the sound exchange fee goes to the artist and 50% goes to the label. Of the portion that goes to the artist: have you seen the LOOONG list of artists that sound exchange “can’t find” to give them their money?

They also want to charge $500 for each “channel” or stream on services like live365 to cover “administrative costs”. This is on top of the royalties. Tell me it costs $500 to “administrate” an extra row in a database. It’s BS. Who is getting that money? Not the artists.

Pandora has also published some nice numbers on the fact that a large chunk of their listeners end up BUYING MUSIC they hear on the site.

In never fails to amaze just how intent the record industry is on destroying themselves.

It’s not about not wanting to pay for the music, it’s about not being bankrupted. The argument isn’t that we don’t want to pay, the argument is parity.

RE: Small Webcasters “exception”, it’s a temporary solution to a problem that won’t go away. Do we REALLY want to REVISIT this in 2010? Just like we went through this in 2002? It’s like putting fix a flat in a tire…you still have to eventually just buy a new one or find if the one that has a leak can be salvaged. To the musicians, how would you feel if you were being told that as long as you’re unsuccessful, you don’t have to pay any taxes. Webcasters, under this “exception”, are basically being penalized as soon as the actually do achieve any level of success. The more these stations are being listened to, the more expensive it is to keep them running. If you don’t care about lots of people listening to the stations playing your music, then that “exception” is great. However, if these stations are put out of business because they’re pouring 80% of their revenue, then you’ll see even less in royalties than you currently are.

our decision not to take part was taken when this was first announced. we never went on record for saying we would. most radio stations that do participate signed up as soon as it was set up, and their taking part was then subsequently publicized.

we do make a lot of decision obviously and it seems like on this one people wanted an explanation so we gave one. http://blog.last.fm/2007/06/25/make-some-noise

1) Last.fm is UK-based, but US-owned. The difference: they follow UK laws, not US laws. They aren’t affected by the rates. Furthermore, the rates themselves are based on where the *site* is located, not where there listeners are. The other way is impossible to do, because then you’d have to account for proxies, etc, to determine rates.

2) Last.fm *already pays the higher rates*. They’re not striking because the new rates don’t change anything for them. It would be like Google going on strike so that all the other search engines could develop their ad practices. Last.fm’s competitive edge is that it has already adjusted to the new cost system. Why give up a competitive edge when you don’t need to?

3) Pandora blows. It used to be good, but now it’s just a sellout.

4) I couldn’t listen to my music today because….you don’t want to pay for it? How does that make sense? If you don’t want to pay for their music, don’t use.

It’s clear (to me at least) that music consumption is moving from a “pay per purchase” to a “pay per listen” economy. It’s critical musicians are properly remunerated for their work, which in this environment means paid each time their songs are played.

Virtually every other country in the world has a performance royalty; the US does not. This was grandfathered in by the broadcast industry here years ago. When you’re talking about ASCAP/BMI, you’re talking about royalties that go to the songwriters, not the performers. Separate issue.

The rates that the current CRB has established are more than fair; there’s also a “small broadcasters exception” that allows smaller broadcasters to pay a percentage of their income as opposed to the per-listen fee.

Just because someone claims that they can’t operate their business at these rates doesn’t mean that the rates are unfair. They’re not. They’re entirely reasonable. If someone wants to run a radio station and not charge for it, that’s their choice. It doesn’t mean that the artists should therefore not be remunerated.

As a musician and someone who has worked in the streaming media industry since its inception, and someone who runs a decent sized media hosting business, I think this day of silence is misguided. When this issue first arose five years ago, hosting charges were 10x what they are today, and people weren’t prepared to pay for _any_ content. Nowadays, folks have no problem subscribing to Rhapsody, Last.fm, or any other number of music services. The landscape has changed. Musicians should benefit from this.

If you can’t make money with your streaming business, while paying for the content, then there’s something wrong with your business model. Capping on Last.fm for not participating in this is laughable.

Firefox can’t find the server at http://www.last.fm.”

Hmm. I guess someone silenced them though.