Congratulations to the winners of our giveaway of three registrations to this week's NAB Radio Show in Seattle! From our "advertiser" entries, we drew the name of Denise Sutton of WarpRadio.com. Our "broadcaster" winner is Paul Schramski, general manager of KDVS in Davis, CA. And our "webcaster" winner is Derryl Harris, owner/operator of WRPS/WebRadioPugetSound.

BY KURT HANSON
It's good to know the record industry and small commercial webcasters are talking (see Friday's RAIN lead story here, which includes an early draft of this essay), but it's a shame to hear that they seem to be so far apart.

From this vantage point, this looks like it's as bad a negotiation as between the baseball owners and players -- as if it might go right down the wire (October 20th) and hurt all sides, including the image of all players in consumers' minds, in the process.

Apparently the parties involved are still being argumentative and litigious, rather than trying to craft a solution that is a "win-win" for all parties."

Rates around the world are reasonable
As shown in a chart in the May 28th issue of RAIN (here), AM and FM broadcasters in most countries (other than the U.S.) have to pay a sound recordings performance royalty, but the rates are generally in the 2%-to-4%-of-revenues range and in any event are almost always significantly less than the composers' royalties.

If the RIAA is indeed still asking for a double-digit percentage of revenues, that's triple or quadruple or quintuple both the US composers' royalty rate and what might be considered reasonable using international broadcasters' rates as comparatives.

Record companies won't admit promotional value
Frustratingly, SoundExchange executive director John Simson says that some labels still aren't convinced of the promotional value of Internet radio airplay — e.g., some label execs (or at least RIAA lawyers) are taking the position that if there was an all-Broadway Internet radio station (with "Buy it now!" links accompanying every song), that might hurt sales of Broadway cast CDs.

This is ridiculous! Obviously broadcast radio has promotional value, or labels wouldn't spend millions trying to get radio airplay for their product. And Internet radio's extra features, such as title and artist displays, "Buy it now" buttons, and CD cover art in many cases, clearly could only be more helpful in selling records. To argue otherwise is absurd -- it shows a lack of good faith.

If labels would take the non-adversarial approach and say, "Let's figure out how to work together to sell more product," most webcasters would be happy to help -- (A) because they're music fans in the first place, and (B) since they might pick up a small "Amazon associates" commission in the process!

Potential upside is smaller than the attorneys' fees
In any event, we're talking about the possibility of shutting down hundreds of such operations (including webcasters who specialize in indie rock, blues, classical, bluegrass, electronica, folk, world music, traditional jazz, and more) over what is, from a record label's point of view, a tiny amount of money.

Let's do the math: Perhaps there are 300 serious, viable small commercial webcasters, currently, given that the advertising economy hasn't recovered from 9/11 yet, with average revenues of, say, $20,000 each. (Plus there are another few thousand webcasters who are music fans with almost insignificant revenues.)

At, a 10% royalty rate, plus or minus 5%, with 50% of that going to labels, and generously assuming that's just split among the five majors, we're talking about a total take of $300,000 per label per year, plus or minus $150,000.

In other words, the potential upside for labels for being tough negotiators...and possibly decimating the Internet radio industry...is probably less than the cost of the attorneys' fees involved! The potential upside for them is less than the cost of working one single at CHR!

Webcasters need to bend, too
Certainly there are opportunities for webcasters to bend, as well.

For example, arguing that any webcaster with less than $6 million in revenues should be considered a "small" webcaster, because that's the Small Business Administration's definition of a "small business," isn't helpful. It seems to me that $1 million might be a more reasonable cutoff, which would be a webcaster with a few thousand listeners and a couple of employees.

And webcasters could certainly do more to insure that the airplay they provide will encourage listeners to want to buy the CDs they hear. There are some webcasters, for example, that still don't display title and artist and CD name clearly and vividly while each song plays and/or don't offer a "Buy it now" link. They should.

In a difficult time for labels, Internet radio could help!
The record industry has lots of challenges right now: The demise of the cassette format with no new replacement format on the horizon, competition for consumers' dollars from DVDs and video games, the possibly-dangerous combination of file sharing and CD burning, an artistically-stagnant moment in music in the past year or two, clumsy online efforts...

But Internet radio doesn't have to be a problem for the record industry. In fact, it could be a bright spot — if only the labels would just ask for a royalty somewhere in the ballpark of what's reasonable based on composers' rates and international rates, rather than continuing to play hardball for chump change.

From Motley Fool.com: "As far as 'killer' Web applications go, Internet radio has great potential. Imagine listening to any station in the country from the comfort of your own computer. And if none of the brick-and-mortar 'broadcast' stations suit your fancy, you could listen to hundreds of virtual stations that operate only on the Internet...

"There's one big problem, however: Internet radio is withering away, and it will die on the vine unless a bout of common sense breaks out among the major players...

"The 1998 Digital Millennium Copyright Act (DMCA)...declared that copyright holders (meaning the record companies) have a right to receive royalties from songs played on the Internet...

"Of course, the different parties couldn't agree on the amount of compensation...Finally, the US Copyright Office settled on a fee of $0.0007 per listener, per song (or $0.07 for every 100 listeners to a given song). What's more, the royalties would be retroactive to October of 1998.

"This is wrong on so many levels that it's hard to know where to start. First of all, the royalties for most of these stations far exceed even the 15% the record industry asked for...Only radio giants...will be able to afford to maintain an Internet presence.

"Second, the new compensation structure makes no sense...Web listeners should be treated no differently than traditional ones.

"Third, why would regulators set a royalty rate that kills off a promising industry before it can get off the ground? Small, independent webcasters are what make Internet radio great, but they're closing down in droves.

"Fourth, and most importantly, the RIAA is simply one of the most maddening, nonsensical organizations in the country. It either doesn't care about its constituents or can't see that it's killing the goose that laid the golden egg...The RIAA seems to care not one iota if Internet radio survives.

"It seems radio on the Web is down to one last chance. Three congressmen -- Reps. Rick Boucher (D-VA) [pictured right], Jay Inslee (D-WA), and George Nethercutt (R-WA) -- have introduced the Internet Radio Fairness Act (IRFA). It would exempt small webcasters with revenue of less than $6 million from the current fee structure until something more reasonable can be worked out."

Read this entire article in the Motley Fool.com here.

From the Wall Street Journal's "Real Time": "A couple of years ago, most major-league baseball teams offered free streams of radio broadcasts of games from their Web sites. For baseball, this was a great age...

"No more -- today, if you want to listen to the radio feed of a game over your PC, you'll need to fork over $14.95 for Gameday Audio, offered by RealNetworks Inc. and Major League Baseball...

"But if you're expecting us to complain that a golden age has passed, sorry...

For baseball fans, it's horrible being cut off from your favorite team, whether you've moved away from your hometown or are just on a business trip, and a technological solution is welcome...The service is invaluable, and the pay version comes with so many extras (and so much convenience) that that $15 charge doesn't make us bat an eye. In fact, we'll go ahead and call this a model of how to charge for something that used to be free without having people squawk.

"Now baseball is taking another step, rolling out a service that lets you listen to live game feeds over your cellphone. Subscribers to AT&T Wireless who pay $19.95 can listen to any number of games for the rest of the season -- the minutes spent listening to games do count against one's monthly allowance...

"Sounds like a win for everybody -- Major League Baseball and Real Networks make some money, AT&T Wireless gets subscribers paying for more minutes, and fans have another way to stay in touch with their teams."

Read this entire piece in today's Wall Street Journal, or online for subscribers here.