Following our post from Saturday regarding the NAB’s efforts to prevent the Webcaster Settlement Act of 2008 from passing, here’s a quick update: Long story short, H.R. 7084 has passed through both Congress and the Senate. Woo! So what exactly does that mean? It simply means that Pandora and other internet broadcasters can continue to negotiate with SoundExchange and the RIAA with regards to fair royalties. Wait, huh? It’s just a bill that allows them to continue talking? That’s right folks – pretty funny how opposed the NAB was to this procedural bill, no? What a joke the NAB has become. But we digress… Kudos to all who took the time to reach out to their state reps and express support for the bill. Who knows – maybe the RIAA, SoundExchange and internet radio can actually come to an agreement!
At 11 am Eastern Standard Time this morning congress is scheduled to vote on a bill that, if defeated, will represent a major nail in Pandora’s coffin. In fact it’s not just Pandora, we’re talking about legitimate internet radio in general. The major opposition? Why it’s none other than the National Association of Broadcasters (NAB)! Surprise, surprise. The bill in question is H.R. 7084 (Webcaster Settlement Act of 2008); merely a procedural bill that would give Pandora, SoundExchange and the RIAA more time to come to a new agreement with regards to revising the royalty program currently in place. You know, the one that’s killing internet radio. From Pandora Founder Tim Westergren:
We were just starting to feel optimistic about getting close to a settlement. H.R. 7084 is a procedural bill that would extend the negotiation period and give us all the time we need.
The thing that’s so crass is that this bill is beneficial to broadcasters, it just gives us more time to reduce Webcasting fees. They [the NAB] know we’re running out of time and if they can kill the bill they can kill Internet radio.
It’s amazing how terrified the NAB has become of progress. This issue of course is that collectively, they know they have a terrible product. Does anyone listen to terrestrial radio anymore? For years the ratio of advertising to music has been a sick joke on popular stations. With the increasing popularity of Satellite radio and portable audio player-friendly inputs in car stereos we would hope everyone is on the road to moving beyond the dinosaur that is terrestrial radio. After all, you wouldn’t ride a donkey to get to work or use a handful of leaves to… Well, you know.
The House vote on H.R. 7084 is at 11:00 am EST this morning. If passed, it will go before the Senate on Monday. If you’re tired of cleaning yourself with leaves, give Congress a ring (202-225-3121) and tell your representative you support H.R. 7084.
Talk about great reads. Muxtape founder Justin Ouellette finally let the cat out of the bag today and published a lengthy report of his recent trials and tribulations. For outsiders looking in, reading about dealings with the unmitigated disaster that is the music industry is like a guilty pleasure. Rage seems to build with each passing paragraph and one can’t help but think, “are they really this stupid?” Ouellette’s recount of his experiences in recent history fits the mold perfectly. The behind the scenes plan for Muxtape was anything but ill-intentioned; Ouelette had some pretty big ideas and spent a great deal of time reaching out to labels in an effort to move music consumption forward in a very symbiotic manner. In fact in the midst of an extended series of meetings with major labels that seemed to be progressing, albeit slowly, the RIAA struck without warning and dropped an axe that would force Muxtape to go offline. It registered a complaint with Amazon Web Services, Muxtape’s host, that required Muxtape to dump a launrdy list of content within one business day or risk having his data deleted and servers shut down. The rest, as they say, is history.
Ouelette has plans to relaunch as a service geared exclusively toward bands:
The new Muxtape will allow bands to upload their own music and offer an embeddable player that works anywhere on the web, in addition to the original muxtape format. Bands will be able to assemble an attractive profile with simple modules that enable optional functionality such as a calendar, photos, comments, downloads and sales, or anything else they need.
This is a far cry from the original Muxtape model and it will likely have a much more difficult climb in terms of being widely adopted. Here at BGR, we’ll certainly be keeping an eye out for the relaunch and we wish Ouellette all the success in the world. As for the RIAA and music industry in general, it is becoming increasingly difficult to support any means of music distribution that puts money in their pockets. The dilemma of course is in order to financially support the bands you enjoy, you are also feeding the hand that bites. Talk about a catch 22. Whatever, music industry. Keep doing things your way because it seems to really be working out well for you. We’re sure people will be lining up in droves to buy music on microSD cards. You know, just like how we all went running out to get their hands on Ringles. That went over really well.
Do yourself a favor and hit the read link.
Arizona resident Jeffrey Howell learned some a hard lessons this past week. If you are being sued for copyright infringement, get a lawyer and if you are served with a lawsuit that tells you not to tamper with your hard drive, don’t go ahead and format it anyway. In an unfortunate turn of events last week, the second high profile RIAA copyright infringement case came to a screeching halt as it was revealed that the defendant Howell had tampered with the evidence. Howell uninstalled Kazaa, deleted its logs, and formatted his hard drive after receiving the lawsuit; thereby making any evidence irretrievable. The RIAA argued and the judge agreed that “The deliberate destruction… by itself, compels the conclusion that such evidence supported Plaintiffs’ case.” The case was found in favor of the RIAA and a final judgment was announced today. Howell must now cough up a mere $350 in court costs and whopping $40,500 in statutory damages. This case was notable as the RIAA was handed a big setback last April when a judge ruled that simply making a file available on a P2P network did not constitute copyright infringement. A crushing blow to the legal basis of the RIAA’s infringement cases. Too bad it had to end so badly.
It looks like the big guys aren’t the only ones feeling the wrath of the RIAA these days, and it’s only bound to get worse. Muxtape, a service that allows users to upload music from their personal libraries to create an online mixtape, currently services less than 90,000 unique visitors per month according to Compete. That won’t keep it under the RIAA’s radar it would appear, as the service went down yesterday with the note “Muxtape will be unavailable for a brief period while we sort out a problem with the RIAA” on its homepage. A post on the Muxtape blog provides the following message:
No artists or labels have complained. The site is not closed indefinitely. Stay tuned.
It’s funny; rather than embrace this newer wave of online music providers, it appears that labels and the RIAA are intent on destroying these emerging technologies and completely eliminating new revenue streams that have the potential to become massive. By putting a fair royalty scheme in place, the RIAA stands to pull in hundreds of millions of dollars in the short-term and this figure would only increase as internet radio stations and other online music sites continue to gain momentum. Instead, the RIAA is trying to run these sites into the ground in order to maintain the current power structure – even if that means losing out on all of this new money. Users of sites like Muxtape aren’t going to replace their “free” listening habits with purchases, they’re going to find other off-shore sites with similar functionality. Apparently for the RIAA, “nothing” is better than “something” when that “something” helps illustrate just how useless the current record label model is these days.
As traffic to Pandora continues to climb at an impressive rate, far more steep than that of competitor Last.fm as seen in the chart above, the popular custom internet radio provider may be a breath away from closing its doors. Why, you might ask? The answer is not very far from being obvious these days. Wherever there is an emerging revolution in the realm of music consumption, loved by many yet still on the brink of defeat; the RIAA is never far from the scene. Pandora’s current woes fit the mold precisely. Pandora usage is at all all-time high and usage increased by almost two million visits per month from June to July alone, yet elevated royalty rates are making it nearly impossible for the company to stay afloat. After last year’s decision that internet radio provider per-song royalty rates would double there has been an ongoing battle between providers and SoundExchange, an unincorporated division of the RIAA tasked with collecting royalties from digital providers such as satellite and internet radio. The decision determined that the rate would increase incrementally from .08¢ per song per listener in 2006 to .19¢ per song per listener by 2010. While tiny fractions of a penny seem insignificant, they add up quickly. Pandora projects that it will pay out about $17 million this year, or a staggering 70% of its revenue, in royalties. Long story short, it is losing money. The problem is even worse for smaller internet radio providers, where increased royalty rates are expected to amount to between 100% and 300% of annual revenues. Translation: By way of SoundExchange and lawmaker support, the RIAA would rather wipe internet radio off the map with outrageous royalty rates than find a fair way to make some money for its clients (labels and, theoretically, musicians). Why is that? There is no way for us to say but as per-song performance royalties are positioned to wipe internet radio off the map, it should be noted that terrestrial radio pays no such fees.
Tim Westergren, Founder of Pandora, had this to say to the Washington Post:
We’re funded by venture capital. They’re not going to chase a company whose business model has been broken. So if it doesn’t feel like its headed towards a solution, we’re done.