This Week in Law hosts an exception discussion of copyright

Although not a lawyer, I'm a big fan of This Week in Law. Program #62 was particularly outstanding, especially in providing real insight and practical, first-hand looks at the use and value of copyright in a file-sharing world. Cory Doctorow, BoingBoing editor and author, along with Mike Masnick of TechDirt discussed with host Denise Howell and regular Evan Brown how files haring and "piracy" hasn't hurt or devalued their creative content.

Many studies have shown that when it comes to music, a record label's best customers are those who share files. I encourage you to listen to this podcast episode even if you normally don't (or don't think a law-oriented discussion is your cup of tea).

Among other things, Doctorow presents an interesting concept; that the emotional investment companies have in their business models often trumps the practicality of said models. It certainly explains the continued efforts of the RIAA!

Doctorow tells the story of what happened when the E.U. considered changing database copyright laws. In Europe, database information can be copyrighted, giving each information company its own little monopoly. In America, this information can't be copyrighted. Result: In America the information industry grew 25 times over the same period the European information industry declined. Apparently, the only thing that prevented a sharper decline were the investments some European companies made in American firms.

So what happened when the E.U. looked into lifting the copyright restrictions on databases? In reality, everyone could see it was the way to go, but even the companies that invested in the U.S. firms weren't emotionally ready to give up their exclusive control. So the restrictions remain, to the benefit of the U.S. industry, and the detriment of the European.

There's more in this program, such as how the lack of copyright spurs fashion innovation and why link farms don't matter. This is important stuff, and something we should all be informed about. Because the laws being put on the books, and the draconian punishments that go with them, aren't being formed on the reality of the situation, but on the emotional investment of the major players -- and that affects all of us.

RIAA - Really Imaginary Accounting Adventures

Two recent news stories that should give one pause (but probably won't because the subject matter's too esoteric). First, AfterDawn reports that the Government Accounting Office has taken a hard look at the numbers the RIAA and MPAA have quoted for years. Numbers documenting how much they lost to piracy. Numbers showing how file-sharers are destroying their livelihood. Numbers that were totally made up.

In the second story, TorrentFreak shows that -- according to their own numbers -- piracy seems to have little impact on the growing digital download market. According to the numbers, it looks like a simple case of market shift. CDs -- which are very profitable -- are declining in sales, while digital downloads -- low margin items -- are on the rise.

So what do these two stories mean taken together? At the very least, it means that the entertainment industry is not just in deep denial -- it's delusional. Instead of adjusting to a changing market, they're placing the blame on a minor problem by making it a major one.

So the MPAA and the RIAA have gone to war. People have been dragged into court, and hefty fines levied -- based on made-up numbers. Legislators have been stampeded into passing draconian laws that trap the innocent -- based on made-up numbers. Countries are being strong-armed into complying with the Anti-Counterfeiting Trade Agreement (ACTA) -- based on made-up numbers.

As the laws continue to become more severe, more former innocent (and legal) acts are becoming grounds for prosecution. Have you copied a CD to your computer? Used to be legal -- RIAA claims it isn't anymore. Loaned a DVD to a friend? You're doing some unauthorized distribution, friend.

And what happens when everyone becomes a criminal (and liable for arrest, prosecution and fines)  -- based on made-up numbers? What happened to alcohol consumption during Prohibition?

 - Ralph

The Radio Performance Tax - It's not just me

Recently I weighed in on the controversial "performance tax" that commercial (and some non-commercial) broadcasters have been nattering on about.

To recap, record labels want broadcasters to pay a fee for the music they use. Stations already pay such as fee to the writers (publishers) of the music, but now labels want money for the performers, also.

My position is this: this fight was lost a long time ago -- and broadcasters have no one to blame but themselves. And apparently, I'm not alone.

Media professional Ken Dardis recently shared his view of the matter in an Audio Graphics blog post, "Radio Performance: A Fee or A Tax?"

[in] 1998, I was calling for the radio industry to become involved in the Copyright Royalty Board's excessive rates against internet radio. That cry was a forewarning; my chant was that CRB was going to eventually catch up to the radio industry.

The radio industry, not having acted when those first and subsequent calls were made in 2002, 2005 and 2008, put itself in the bull's-eye. Only the blind could not see that the record labels were ultimately positioning this as a "parity" fight. Cable access, then satellite radio, with internet radio and downloading were set up by the record labels and conquered one by one. Radio industry leaders sat silent as the dominoes fell. Parity is the reason that the radio industry should now be made to pay.

Radio hoped that those other media outlets be crushed by crippling performance fees and either be put out of business or so overburdened financially that they could no longer compete with terrestrial broadcasting.

The outlets weren't completely crushed, and audiences have voted with their ears. And now the finger's pointing at the last -- and largest -- a target of the record labels' onslaught.

But let's be clear. It's not a tax. It won't be administered by the government.

It will be a royalty fee paid by commercial businesses (radio stations) for the use of other commercial business' property (labels' recordings) to attract customers (advertisers impressed with audience numbers).

I'm not rooting for either side in this, but I'm with Ken - I've got no sympathy for the companies ensnared in the trap they hoped would catch others.

- Ralph

Day 140 of the WJMA Podwatch. (And yes, WJMA's calling it a tax, too.)

Save Your Radio addendum

Got some offline feedback for my post annotating the Save Your Radio propaganda informational landing page. A little clarification: commercial radio's strategy is to get what they want through misrepresentation, just another link in a long chain of clueless behavior. But the record labels are doing the exact same thing, for the same basic reason -- a failure to adapt.

Commercial Radio

When radio was the primary audio source for news, sports, information and music, life was good. Content attracts listeners, and radio makes money by selling the attention of that audience to advertisers. It's the same concept with websites. Quality content attracts viewers, and sites with strong numbers are more attractive to advertisers. During the 1980's you could make money in radio without even really trying. And so the trimming began. Less live DJ, tighter playlists generated nationally rather than locally, less news, etc.

Radio was still in the content business, but since there wasn't any real competition, the quality and variety of the content didn't matter that much. Satellite radio, while hardly being a radio-killer, should still have served as a wake-up call that content (radio's core business). Instead of competing by improving programming quality (hard to do with skeleton staffing), focussed on the digital nature of the satellite signal and HD Radio was (still)born.

The NAB lobbied heavily to throw up as many legislative roadblocks as possible. They welcomed the RIAA's demand for performance royalties from XM and SIRIUS. Radio's strategy of handling competition was to kill it, so things could return to normal (that is, with radio being the sole audio provider).

The Recording Industry

The major labels are also in the content business. Initially, they started out selling audio recordings on wax cylinders. Why would you purchase one cylinder and not another? Because of what was recorded on it. Labels moved from selling wax cylinders to heavy shellac platters to thinner vinyl LPs and 45s, to CDs. The type of units varied, but it was always about the content rather than the media it was encoded on.

And as long as home recording remained primitive, labels retained control of their material. You could only own a copy of the song if you purchased the media the label sold it on. End of story. Cassette tapes changed that somewhat, but the big shift came with the rise of the original Napster. That's when labels forgot they were primarily in the content business, and not the selling-little-pieces-of-plastic business.

Rather than move into the digital world and begin selling their content in a new fashion, they shut Napster down. Like radio, the strategy has always been to react to competition by killing it. The wholesale suing of downloaders -- both real and imagined -- by the RIAA was a vain attempt to stop the migration to online music, or at least slow it down.

Now keep in mind that when they plead their case, the RIAA never talks about saving the labels. It's always about getting money for the poor, down-trodden artists. The artists that, according to most major label deals, get only 15% of ever CD sold -- less 20% for returns and breakage, less the recording and promotional costs fronted by the labels (as priced and accounted for by the labels). The artists who have yet to see a dime of the $250 million settlement money from the original Napster case or any other case since for that matter.

When satellite radio came along, the labels tried their best to kill, or at least severely cripple it, which they did with intensive lobbying and the enacting of the unprecedented performance fees. The same thing happened with Internet radio. But little plastic disc sales continued to decline, and revenue continued to fall.

So now they turn to commercial radio, looking for more money from one of the few remaining revenue streams (and it is a revenue stream -- radio stations pay royalties to the song publishers, most of which are owned by the majors).

Repositioning the truth

Radio is now facing the same fees they encouraged levied against others. And to garner support, they've misrepresented the performance royalty as a tax, hoping all the negative connotations of the word conjures up will help their cause.

Record labels are trying to get the performance royalty enacted because they're still wedded to the concept of selling little shiny pieces of plastic and that just isn't working. To garner support, they've misrepresented the performance royalty as a way to help starving artists when, in fact, the labels will be the prime beneficiary.

So on each side of the issue of performance royalty, we have an industry that:

1) Does not understand what business they're really in.

2) Prefers to answer competition by killing it off rather than changing to meet new market demands.

3) Tries to garner support for their cause by misrepresentation of the issues.

Sorry, I'm not rooting for either side in this clash of the dinosaurs. Just wish they'd be honest about what they're really fighting about.

- Ralph

Day 63 of the WJMA Podwatch

Coulton's Blue Sunny Day -- by the numbers

Jonathan Coulton recently posted a blog entry where he breaks down some of the numbers surrounding his material. Now this is significant for several reasons. I've written about Coulton before, and in many ways I think he presents a practical approach to having a successful music career in this post-record label era.
The statistics he cites are quite interesting (and I highly recommend reading the entire post). According to Coulton,

I posted [Blue Sunny Day] to the blog on 3/16, and twittered about it with a link to the blog post on 3/17. I have about 5,000 blog subscribers and about 23,000 Twitter followers.
On 3/16 the blog post received 740 unique views, on 3/17 it received 1,942.
As of today, the original blog post has received 4,313 unique views: 2,518 direct, 1,721 from twitter, 788 from Google, 209 from FaceBook, and then some more smaller sources.
Worst case scenario (every unique view = one free download), the ratio of paying customers to freeloaders comes to about 13.4%

And yet,

The eight-day period since the song was first posted boasts a 40% uptick in digital sales in my store compared with the eight days prior to that…

So then extrapolate what happened with this song across my entire catalog, across all the things sold that make up my income, across the past and present and future, across all the Internet radio stations and file sharing networks and FaceBook pages and Twitter posts and the whole wild and woolly Internet - you will never know HOW it works, but I can tell you that for me it does.

BTW - here's Jonathan Coulton performing his song "Blue Sunny Day, " courtesy of part of the wild and woolly Internet.




Here are the important take-aways from this.
1) Jonathan Coulton doesn't look at the non-paying downloads as lost sales. Mark that thought, because that's what the RIAA doesn't get. They assume that every unpaid download is a lost sale, which is how they arrive at their claim that they're losing millions. But this completely ignores a very basic human behavior (that I've commented on in the RIAA vs. Sam's Club). That is, the lower the price, the more likely someone is to take a chance on it. I’ll try something for free that I won’t necessarily pay money for. One hundred people each taking a free sample meatball does not represent one hundred lost sales of packaged meatballs.
2) Coulton recognizes that what's important isn't the sale of the unit (in this case the song download), but

how that unit improves his overall income. Many artists are beginning to see that the downloadable song has little perceived value to the consumer ($0.99, tops) -- just like a flyer or a brochure.
And just like those non-valued pieces of paper, the song can serve a different function. It can help publicize the artist, increasing interest in their output, driving bigger audiences to the live shows, and more merchandise being sold.
Again, look at the record labels. They're still trying to lock down everything so that they can dole it back out for a price. That's pretty short-term. Because while they're failing at their task, the world's moving on.
There's a very healthy and growing indie music scene that's taken a different tack with their fans. Rather than trying to sue their fans into oblivion, they're sharing their music and reaping the benefits. And an increasing number of these artists (like Jonathan Coulton) are doing fine without a record label.
So Coulton’s taking the long view – and for him it’s paying off (figuratively and literally).
I appreciate Jonathan Coulton sharing some of the stats surrounding his music. Anyone thinking about becoming a musician should be paying attention. Come to think of it, so should the RIAA.
- Ralph

Radio stations reap the wind

Robert Conrad of WCLV is leading the charge to get the government to not enact the “Performance Rights Act” H.R 848, which would require terrestrial broadcasters to pay additional money for the music they air. Here’s his plea:

WCLV needs your help. And we need it now.
I’m Robert Conrad, president of WCLV. The House Judiciary Committee recently held hearings on the newly reintroduced “Performance Rights Act” (H.R. 848), otherwise known as the “Performance Tax”. If enacted, the bill would require WCLV and other broadcasters to pay a royalty for all the recorded music we play on the radio. This money would go the record companies, most of whom are foreign owned. This would be in addition to the royalty payments we already pay to composers and publishers and to record companies for the right to broadcast our music on the Internet. The financial impact of this performance tax could be financially devastating at a time when the advertising that supports WCLV and its classical music programming is at an all time low due to the recession.
We ask you to write your representative in support of an opposing resolution, the “Local Radio Freedom Act” (HCR 49), was introduced recently. You’ll find a sample letter on our website. Click on the banner on the home page or on the links on every page at wclv.com. Help WCLV and other broadcasters. Express your support of the Local Radio Freedom Act. And please - do it today. Thank you.

I have a great deal of respect for Mr. Conrad. He’s accurately called many trends in the broadcasting and has made WCLV the strong station it is today. In this case, though, he’s having to pay for the incompetence of others, and I’m not sure it’s a battle he can win.

A little background. When the idea of charging radio stations for the music they used first came about, there was (naturally) resistance from the broadcasters. Most stations had their own house orchestras, or featured a lot of live music (this was the 1920's), and so the primary rights issues were with the composers. ASCAP (the American Society of Composers and Publishers) was formed to collectively negotiate fees and collect royalties from various performing venues. They determined that radio stations constituted a public performance and demanded their fees.

When ASCAP double their fees in the 1940's broadcasters responded by allowing their orchestras to only play public domain works (that’s why we have Glen Miller’s big band arrangement of “Little Brown Jug”). They then created their own composer’s organization, BMI (Broadcast Music, Incorporated) to offer much more favorable rates to the stations.

In time, everyone came to terms, and things were fine. When broadcasters started using recordings rather than live musicians in the 1950's, though, the question of paying the record labels for the use of the material came up. Eventually, it was agreed that the publicity radio play – and resulting record sales – far outweighed any fee the labels might collect, and so artist fees never got off the ground.

In the 21^st Century, things got ugly. When satellite radio started negotiating fees, in 2004, the record labels weighed in again. It was a new media and the old rules didn’t apply, they argued. They wanted XM and SIRIUS to pay artist fees along with the ASCAP/BMI royalties. And terrestrial radio stations sat on the sidelines and egged the labels on.

Broadcasters were terrified of satellite radio and were hoping that these additional fees would help kill the fledgling industry. There were some NAB members – like NPR – that tried to get their colleagues to see that this was a dangerous precedent to set, but no dice.

In 2007 when Internet radio stations had to negotiate their fees with the SoundExchange (founded by the RIAA), they too had to pay artist as well as publishing royalties. Again, NPR and a few others tried to get the NAB to weigh in, but to no avail. Terrestrial radio stations, for the most part, didn’t stream and wanted these upstart Internet radio stations to be driven out of business by these fees that they didn’t have to pay.

In the end, artist royalties were levied with very little effort. And the primary reason was because satellite radio was already paying these fees. The precedent had been set.

And now the spotlight’s turned to terrestrial broadcasters. If every other broadcaster has to pay artist fees, why not them? And it’s now being argued that over-the-air radio is no longer the place where new music’s discovered – the Internet’s taken that role over. So if the publicity value isn’t there anymore, why should terrestrial radio be the exception?

Why, indeed? This isn’t something that’s come out of the blue. Digital broadcasters have been fighting this battle for the past five years, with terrestrial radio rooting for the other side. And now it's their turn. It's unfortunate that stations like WCLV are getting caught in the crossfire, but I think we’re just seeing an industry reaping what it’s sown.

- Ralph

The RIAA and the Eyes of the World

The complete transcript for Capitol Records vs. Jammie Thomas is now available online. Why is this important, and why should you care? Several reasons:

1. If you're an average citizen who's curious but undecided about the RIAA litigations, you can go straight to the source and see how this landmark trial was conducted. Then judge for yourself if the defendant was given a fair trial and that the jury arrived at the proper conclusion.
2. If you're someone who's received a letter from the RIAA threatening prosecution, then you might want to make sure you study this, and that your lawyer takes a good look at it, too.
3. If you're a lawyer interested in copyright law or have been asked to represent someone threatened by the RIAA, then you should decidedly read this transcript to better understand how to prepare such a case.

The main thing I got out of reading the transcript was just how dangerous it is to be hauled before a court for a high-tech crime where neither the judge nor jury nor even your own lawyer fully understands any of the core concepts about the situation.

The RIAA's case rested on an account name with Kazaa that matched Ms. Thomas' other account names for e-mail, etc. They claimed that that account name had offered 1,700 different song files through Kazaa. Strangely, though, they only chose to prosecute for 24 specific song files.

Here's what I found most fascinating, though. The RIAA could not conclusively prove that the account belonged to the defendant. They could not prove that anyone had actually downloaded the songs from the account. The hard drive of Thomas' computer had been replaced, destroying any forensic evidence. The timeline suggested that she had sent the computer to Best Buy before notification had arrived and evidence shows that Best Buy had recommended replacing the drive.

Nevertheless, the RIAA maintained that they had the right person, that the drive had been replaced for criminal reasons by the defendant, and without evidence of actual file sharing, or confirmed identity, or even possession of the song files themselves, managed to push through a conviction and a $220,000 fine. Innocent until proven guilty? Had the jury been made up of people familiar with the workings of the Internet, there would have been more than enough reasonable doubt -- but that wasn't the case.

Later, the judge declared a mistrial, after re-thinking some of the instructions he gave the jury (based on information he received from the RIAA). But if you think this is a dead issue and therefore irrelevant, know this: the RIAA just recently got turned down on their appeal, and they're not done yet.

My New Year's resolution? Become an even more informed citizen. And the posting of this trial transcript is an excellent opportunity for self-education.

- Ralph

Day 191 of the WJMA Web Watch. (I hope WJMA's resolution is to relaunch their website soon.)

While We Were Sleeping...

President Bush signed the PRO-IP into law. The Prioritizing Resources and Organzation for Intellectual Property Act beefs up penalties and creates an "Information Czar" to oversee enforcement of intellectual property rights. Any guesses as to which side people fall on this?

The MPAA's happy. The RIAA's happy. They say:

Additional tools for intellectual property enforcement are not just good for the copyright community but for consumers who will enjoy a wider array of legitimate offerings.

But Public Knowledge said:

The Pro-IP bill was not necessary. It simply adds penalties to a copyright regime that already is out of balance.

Whose right? Read the H.R. 4279 for yourself. And think of this - how many times have you inadvertently broken the law recently, thinking that by purchasing a recording or movie you were allowed to use it as you pleased.

Looking over the roll call vote, I see that Rick Boucher, the Representative from my native commonwealth Virginia who "gets" the Internet, voted Nay. As for my representative, Eric Cantor? "Aye."

Aye-yi-yi! Time for another letter to my congresscritters!

- Ralph

Day 119 of the WJMA Web Watch.

Internet Radio Saved? Let's run some numbers!

So the legislation's passed to allow webcasters and the SoundExchange (which represents the RIAA) to continue negotiating the royalty rates the Copyright Board allowed. No one's arguing that rates didn't need to increase -- just that they needed to remain rooted in reality. And not the "reality" of the SoundExchange.

If you go to the SoundExchange website, you can see for yourself what the rates are (strangely, I couldn't link directly to the pages in question). So I decided to run the numbers for myself to try to get a handle on this business.

I had to make some basic assumptions in order to do this -- real-life conditions are far more complicated.

Here goes: for 2006-2007, the rate was calculated based on an hour of listening. One person listening to one hour (or a part thereof) equaled one unit to be paid for. If one hundred people listened to the same stream, then that would equal one hundred hours requiring royalties.

Beginning in 2008, the rate changed from an hour of listening to a price per song. Again, that's multiplied by the number of listeners. For our purposes, I've assumed that the station's playing 100% music for the full hour or 15 four-minute songs.

I've also assumed exactly 100 listeners per hour (people who only listen for part of an hour or part of a song count as a full listen, so 100 listeners may actually generate higher or lower billable hours/songs). And I've assumed the station streams 24/7 with exactly 100 listeners every hour.

Finally, on the revenue side, I've also made some ballpark assumptions. I've taken an average rate of 0.20 CPM, (cost per thousand) for the total amount of ad revenue generated by site traffic. Which means that for 100 visits in an hour, the site earns $2.00 in ad revenue. So for a year, the income would be $17,520.00.

In 2006, the rate was $0.0123 per hour. Which, for 100 listeners, means $1.23 per hour. Our hypothetical netcaster clears $0.83 an hour, for a total of $15,020.00 a year.

In 2007, the rate went to $0.0169 per hour. That boosts the rate for our 100 listeners to $1.69, leaving $0.77 for our netcaster. The net income drops to $6,745.20 -- less than half what it was in 2006.

In 2008, the rate went to $0.0014 per song. That translates out to be $2.10 for 15 songs in an hour for 100 listeners. You see the problem. With an income of $2.00 an hour for those 100 listeners, the netcaster loses $0.10 an hour, for a net loss of $876.00 for the year.

The rate's already set to increase to $0.0018 for 2009, and $0.0019 for 2010. Our netcaster loses $0.70 and then $0.85 an hour respectively. In 2009 they'll lose $6,132.00, and $7,446.00 in 2010.

Now, of course, I didn't factor in bandwidth costs and other operating expenses that the netcaster has to pay for out of that ad revenue. And online ad rates are declining, not growing, so it would be difficult to raise ad rates to keep pace.

Bottom line? It's unlikely there'll be any webcasters left in the U.S. if this goes on. Even the largest ones, such as Pandora and LastFM don't have pockets deep enough to sustain an escalating negative cash flow.

So that's where things stand now -- even after the "saving" legislation just passed.

There's one set of numbers the SoundExchange neglected to run.

(Whatever royalty rate you want) x (No listeners) = Zero money

And if Internet radio's killed off, that's the only equation that will matter.

- Ralph

Day 110 of the WJMA Web Watch.

slotMusic -- Abuse Your Illusion

So SanDisk and EMI, Sony/BMG, Warner and Universal Music announce the arrival of slotMusic. One of the leading manufacturers of embedded memory devices and the four major record labels are coming together to bring albums loaded on special miniSD cards to market.


Excited?

Thought not.

I expect it will meet with the same crashing silence as Ringles.

The problem is the serious disconnect between what consumers want, and what the labels are prepared to give them. The major labels want to sell physical product -- what music's on it really doesn't matter that much. The customers want to buy music -- whether or not it's attached to any kind of physical product is irrelevant.

See how this is going to end badly?

Why do the majors continue to cling to the concept of selling physical units instead of chunks of audio data? Because their whole structure is based on that manufacturing-based business model used by soft drink companies, car companies, and many, many others. But music has shifted to more of an information technology business, which uses a different structure, different skill sets, and a different business model.

Almost ten years into the digital music revolution, and we get slotMusic.

Well, you can't turn a charging dinosaur on a dime, you know. But it would be nice if those riding it could at least steer the beast towards the right general direction.

- Ralph

Day 102 of the WJMA Web Watch.

My Pandora Story

Controversy about the possible shuttering of Pandora.com continues on the Internet. If you read the comments under any of the stories, you'll see a recurring theme -- people discover music through Pandora. Music that they buy.

I have that story, too. And it gives us some numbers to work with.

"The Love Generation" is one of the radio stations I started on Pandora. As the description says,

Sweet vocal harmonies from the Summer of Love. For a brief span of time, groups made groovy music influenced by the sunshine pop sensibilities of Southern California. Mellow songs from a gentler time.

While I started out with artists I already knew, such as the Love Generation, the Fifth Dimension, and Spanky & Our Gang, it wasn't long Pandora began adding songs and artists I'd never heard of before -- but I really liked. And, yes, I followed the links to Amazon and started buying music.

So far, I can attribute the following purchases directly to this one Pandora channel -- one of the six that I have.

Call Me - the Songs of Tony Hatch

Am I Dreaming?: Dream Babes, Vol. 1

Backcomb 'N' Beats: Dream Babes, Vol. 3

Go Girl: Dream Babes, Vol. 4

Folk Rock and Fancy-Free: Dream Babes, Vol. 5

Sassy and Stonefree: Dream Babes, Vol. 6

Beat Chic: Dream Babes, Vol. 7

Stockingtop Pop: Dream Babes, Vol. 8

Paper Dolls House

Each of these discs cost about $19.00 (most were imports), so listening to Pandora for free caused me to purchase $171.00 of music directly from the labels. So let's say the average listener only buys one CD or download equivalent (although I know plenty of music geeks who've spent even more).

Pandora has approximately 6.5 million subscribers. If each one only spent $15.00 on music they discovered through Pandora, then the site would be responsible for generating $97.5 million in music sales. And a good portion of that, I suspect, went to non-Top 40 artists. After all, I wanted more music by Two of Each and Jackie Trent -- not Beyonce and Avril Lavigne. 

And if the average Pandora listener buys more than one disc? Well, then SoundExchange -- currently collecting 75% of Pandora's revenue -- really is strangling the goose that's laying golden eggs.

 - Ralph

Day 67 of the WJMA Web Watch.

Pandora Boxed?

Looks like it's time to write my congresscritters again. And this time, I'll send it snail mail to let them know I mean business. The Sword of Damocles hanging over netcasters just slipped a little.

Pandora.com's announced they're rapidly approaching the point where they'll have to go dark. Why? You've read it here and many other places as well (I hope). SoundExchange, the agency that collects artist royalties from Internet broadcasters and streamers jacked up the rates past the point of sanity. While no one argued that the rates needed to go up, the industry was stunned when SoundExchange proposed (and the Copyright Board promptly agreed) that a 300% to 1200% jump was fair -- even though it meant royalty rates would outstrip income for most netcasters.

The old system was scalable. A percentage of a netcaster's income was paid to the artists. So niche netcasters catering to a small audience paid a small amount, and popular services with many listeners paid a large amount. And there was a reason for netcasters to grow their audiences. The more listeners, the more income -- and the more the artists got.

Under the new system, it doesn't matter. Unless you have a massive audience, you can't bring in enough to pay the royalty fees which have a pretty steep minimum fee. And when the service goes dark? Then no one gets any money, and how does that serve the artist?

I'll share my letters to my Congressmen encouraging them to support S. 1353 and my Representative to support H.R. 2060 in this blog.

No one's asking for an industry bail-out. As MC Lars said:

You know, we just wanted a level playing field.

- and not by leveling Internet radio.

- Ralph


Day 65 of the WJMA Web Watch.

Download This Song -- Two Years Later

Hey Mr. Record Man
The joke's on you
Running your label
Like it was 1992
Hey Mr. Record Man,
Your system can't compete
It's the New Artist Model
File transfer complete

MC Lars' 2006 Internet hit "Download This Song" articulated the disconnect between the major records and the rise of downloading music consumers.



Two recent court decisions made me wonder how far we've come since MC Lars first penned his song.

So Warner, EMI, hear me clearly
Universal Music, update your circuitry
They sue little kids downloading hit songs
They think that makes sense
When they know that it's wrong

The RIAA continues to sue right and left, but the tide is shifting. Several cases are under review because of the questionable practices of MediaSentry, the security company that either is or isn't an investigative agency depending on the case.

I know I'm rhyming fast, but the message is clear
You don't need a million dollars to launch a career
If your style is unique and you practice what you preach
Minor Threat and Jello both have things to teach!
I've got G5 production, concept videos
Touring with a laptop, rocking packed shows
The old-school major deal? It makes no sense
Indentured servitude, the costs are too immense!

I've talked about truly indie artists like Jonathan Coulton and the Mason Brothers before, but the exception is increasingly becoming the rule. And why not? How much do you want to net from your music sales -- 90% on your own, or 12% as an artist signed to a major label?

Their finger's in the dam but the crack keeps on growing
Can't sell bottled water when it's freely flowing

And now the another piece of the puzzle falls into place. The federal appeals court ruled on a landmark case involving freeware. Bottom line -- freeware and creative commons licenses may not have money attached to them, but if it doesn't mean they're not protected. So all those musicians who've made their songs available for non-commercial use (which increases their popularity) are still legally entitled to the benefits from any commercial usage.

So now it's even easier to make money by giving things away.

You know, we just wanted a level playing field.
You've overcharged us for music for years, and now we're
Just trying to find a fair balance. I hate to say it, but:
Welcome to the future.

Download this song.

- Ralph

Day 62 of the WJMA Web Watch.

The Anthropology of YouTube

If you think YouTube is just goofy videos of skateboarding dogs and silly but painful pratfalls, then you've missed something significant about this site. Michael Wesch, professor of anthropology at Kansas University, has been studying the Internet -- and specifically YouTube -- for some time.

His video, "Web 2.0... The Machine is Us/ing Us" should be required viewing for anyone trying to do anything online (in my opinion).

Wesch recently posted his Library of Congress address, "An Anthropological Introduction to YouTube."

So why should you care what some egghead has to say about videos with kittens playing the piano? Well first, what he talks about is more fundamental than that -- he gets at the underlying social forces that drive the YouTube phenomenon. Second, Wesch is an academic with real-world experience in his field, so his observations and conclusions have been documented and tested. And any business with an online presence -- even if it doesn't post YouTube videos -- needs to understand the core concepts Wesch presents.



His concept of context collapse is probably the thing most traditional businesses stumble upon. Basically (if you haven't watched the video yet), the idea is this: once something's made available on the Internet, other people can take it and use all or parts of it for their own self-expression -- and the original creator has no control over its use.

Now this is the kind of thing that keeps RIAA and MPAA lawyers busy round-the-clock issuing take-down orders and filing lawsuits in a vain attempt to hold back the tsunami with an umbrella.

But it's also the kind of thing that made Jonathan Coulton a star. While Prince goes after a mom for the background music heard in a video of her child dancing, Coulton encouraged people to use his music to create their own videos -- and they have. Each one raises Coulton's profile, and each one represents another way for his music to reach potential fans.

Coulton's embrace of YouTube culture has helped him monetize his music while the major labels continue to spend huge sums of money to wage war on their artists' biggest fans.

Which is the smarter marketing strategy? Which one does your business embrace?

Invest an hour. Watch the video.

- Ralph

Day 52 of the WJMA Web Watch.

The Public Radio Puzzle

I'm here in hot, hazy and humid Orlando, Florida for the annual Public Radio Development and Marketing conference. So why should anybody outside of the public radio system care? Because at the core of this conference, these professionals deal with one of the fundamental problems of Internet businesses -- especially content providers.

Problem: How do you get people to pay for something they can get for free?

Anyone can tune their radio to the low end of the dial and listen to a public radio station for free. They can also watch a public television show for free, too. But these media need the financial support of their audiences to survive. So how do you get people to pay for something they get for free?

While this conference will really go into the nuts and bolts of various specialized fundraising techniques, the overall concepts apply to just about any Internet content provider.

1) Deliver quality content. If it's presented as having no value, it's tough to ask people to pay for it. Public broadcasting makes a point of delivering (and telling their audiences they deliver) quality programming.

Look at the music industry. The public "knows" that the price (and therefore the value) of a song is only 99 cents. That's what it is on iTunes, and that's what it is most everyplace else. Sure, it's a different price at Amazon -- it's lower. So when someone shares or illegally downloading a song, they figure the record company's at most only out a buck. Music isn't valuable, so taking it shouldn't be a big deal. See the problem?

2) Be specific about what you want the audience to do. People will generally cooperate if they understand what's expected of them. For public radio, it's explaining why they need the money, and how the listener can help.

For a website trying to build traffic, it's making sure the navigation is clear and intuitive -- and that the user doesn't have to jump through hoops to get to the content.

3) Develop more than one source of income. Public broadcasters get a small amount from the Corporation for Public Broadcasting (they're not entirely funded by the government as some like to think). Pubcasters also bring in money through underwriting (sort the equivalent to advertising). And even listener support takes many different forms -- one-time donations, monthly contributions, thank-you gifts for certain pledge amounts, trips, prizes, special exclusive events, estate planning, and more.

The goal of any business with a web component should be to maximize the opportunities. It's a recurring theme in our WJMA website case study. A radio station that thinks its sole source of income is selling ads for its over-the-air broadcasts is living in the last century. Some income streams will be stronger than others. But which is worse: to have your primary source of income dry up, or to have your sole source of income disappear?

And that's why a lot of folks are here in Orlando. To share ideas and figure out how to persuade people to voluntarily pay for what they can get for free, and to broaden the revenue streams as much as possible for the rocky economy looming ahead. And who among us isn't thinking of that as well?

- Ralph

Day 32 of the WJMA Web Watch.

Fair and balanced -- our five worst posts

Our last post we took stock of where we were after 30,000 views and ran down our five most popular posts. As as we've done before when we pass a milestone like this, we're also going to run down the five least popular posts, in descending order.

After all, what you don't like should get the same attention from us as what you do.

5) After the Bum Rush (Ralph) -- My analysis of the attempt to game the iTunes charts seemed to be of little interest to readers. Perhaps if I had used the uncensored version of the Black Lab's album art for "Passion Leaves a Trace."

4) The RIAA and musical myopia (Ralph) -- This was an explanation of the relationship between the RIAA, SoundExchange, the Copyright Board and how it all impacted Internet radio. A little too music-geekish, perhaps?

3) Pulling Cable (Ken) -- Ken's post about new fiber being laid in his neighborhood had him wondering if HDTV would soon be available. It was. And that's that.

2) The Revolution Will Be Dugg (Ralph) -- My commentary about the spreading of DRM codes as an act of civil disobedience seemed to not add much to the conversation.

And the absolute least-read post so far:

1) Return of the Marching Memes (Ralph) -- This was also the least popular post when we did the first survey at 10,000 views, and still sat in the basement at the 20,000 mark. Well, it seemed like a good idea when I wrote it...

Once again, I have four of the five bottom posts. Ken has one entry on the low end, but he still makes a strong showing in the top five.

We'll keep working hard to turn out posts you want to read -- and we'll take our lumps when we fall short.

- Ralph

Day 31 of the WJMA Web Watch.

Another milestone -- and our top five posts

This weekend "CE Conversations" passed another major milestone. According to Feedburner, (which tracks the subscribers to our RSS feed and hits to our Feedburner mirror site), we've had over 30,000 views to our modest little blog. (The StatCounter down in the lower right of this page tracks direct traffic to this site, but it hasn't been activated very long).

Every 10,000 views, we take a look at the most -- and least -- popular posts of all time, to see what you like to read (and what you don't).

So here's our five most popular posts since we launched in August 2006.

5) A Worthy Supporting Role (Ken) -- commentary on Rex Ingram's role in "Sahara" and how it played against racial stereotypes.

4) Who needs an iPhone, when.... (Ken) -- suggesting an alternative to the iPhone madness. It was written about the first generation iPhone, but Ken's thoughts are still just as valid.

3) Kens' Jeopardy Adventure (Ken) -- a new entry to the top five. I wonder how many readers thought this was about Ken Jennings. If our Ken aquits himself well on the show, maybe it won't matter.

2) The RIAA and the low-price spread (Ralph) -- another new entry to the list. The story of how the dairy industry tried to turn consumers away from margarine and back to butter with archane legislation seemd to me to have interesting parallels with the record industry's current shenanigans.

And the most popular post to date remains,

1) Greenberg Revisited (Ralph) -- discussing the importance of well-researched price guides as opposed to relying on Ebay to determine the value of collectibles

When we started, both Ken and I were writing about an equal number of posts. But with the passage of time and Ken's increasingly rigorous triathlon training regimen, his contributions have become less frequent even as his race stats have improved.

Quality still trumps quality among CE Conversation readers, though. Despite his decreased posting schedule, Ken still has three of the top five posts -- and his overall total of views still bests mine.

- Ralph

Day 30 of the WJMA Web Watch.

Money for Nothing -- the Coulton Conundrum

The story of Jonathan Coulton and his success as a singer-songwriter has been well-documented. He's been featured in the New York Times, inteviewed in Wireless Magazine, profiled on NPR, and been on several podcasts, blogs and other forms of e-media. And yet most of the struggling musicians I talk to have never heard of him.

And that's too bad, because they could learn a lot from Coulton. Much has been made about Radiohead and Nine Inch Nails giving away music as a way to increase interest and therefore sales. The question remains, though, if they could reasonably expect the same massive response if they had not already been well-known acts before their experiments.

Jonathan Coulton started out as a complete unknown, and built his fanbase through an innovative and unusual fashion. He wrote and recorded a song each week for a year and posted it on his website. While you could purchase Coulton's songs, many of them you could also download for free.

Coulton's compositions were protected by a Creative Commons license, which meant others could use them freely for non-commercial purposes as long as he was credited. And people did.

Before the year was over Coulton's music started showing up all over the Internet. Because people could use his material without a lot of complicated licensing, almost 2,000 fan-made music videos were posted on YouTube alone.

Here's one of the many videos made for one of my favorite Coulton tunes "Ikea."



The songs Coulton posted eventually were collected into albums, which are available for sale through normal indie music channels such as CDBaby.com. Coulton toured, and continually played to larger and larger audiences. And his fanbase continues to grow to this day.

His song "Code Monkey" has become an IT anthem.



Recently, he was commissioned to write the closing song for the video game "Portals," which opened up an even wider audience to Coulton's music.



While I'm not suggesting every rising artist should copy Coulton's "Thing a Week" model, there are some takeaways from his career that I think every independent musician should know about.

1. Offer quality content -- If Jonathan Coulton didn't write good songs, he would still be working that day job.
2. Use the tools you have to connect directly with your fans -- The Internet offers many inexpensive ways to reach niche markets. Websites, blogs, podcasts and emails are all good places to start.
3. Keep control of your material, but not too much control -- If you purchase a Coulton song, the artist gets the cash. There's no record company to take the lion's share. And because Coulton allows non-commercial use of his material, his fans have spread it farther and faster than any record label-funded publicity campaign possibly could.

I first heard "Ikea" on a podcast and immediately liked it. When I heard Coulton's version of "Baby Got Back," I started actively looking for his music. I checked out some of his other tunes from his website, and now own some of his albums.

The major record labels consider every shared song a lost sale. For Jonathan Coulton, every shared song set up the potential of another sale. Independent artists need to take note.

And the rest of us just need to listen. These songs are great!

- Ralph

Still fair and balanced -- our bottom five posts

Our last post we took stock of where we were after 20,000 views and ran down our five most popular posts. Just as we did when we hit the 10,000 mark, we're also going to list the five least popular posts, in descending order. After all, if we celebrate the good, we ought to acknowledge the bad.

5) After the Bum Rush -- My analysis of the attempt to send the record labels a message by pushing an independent release to the top of the iTunes charts. Was it successful? Fortunately, more folks responded to the challenge than read my post about it.

4) I Want My MTV YouTube -- I'm hoping this one's in the gutter just because it's so recent. I offer up the concept that YouTube serves the function of the original version of Music Television.

3) Pulling Cable -- Ken observed new fiber being laid in his neighborhood. Would HDTV finally be available? Did you care?

2) The Revolution Will Be Dugg -- My attempt to put the spreading of DRM codes as an act of civil disobedience into a larger context.

And the absolute least-read post so far:

1) Return of the Marching Memes -- This was also the least popular 10,000 views ago. When you're not interested, you're really not interested.

Four of the five bottom posts are mine. Ken finally has an entry, but he still comes out ahead when you look at the most popular posts. No matter how we look at the stats, you, gentle reader, have voted with your mouse clicks. Quality wins over quantity once more. And I don't think either of us would want it any other way.

- Ralph

Internet Stream Dries Up in Tidewater

A reader asked me to comment on the decision by sister stations WTYD and WBACH to cease Internet streaming. A simple posting on the sites of these Williamsburg, Virginia stations announced the end of the service.

Had the station chose to stick to facts (rates have risen, income hasn't, something has to give), I wouldn't be writing about it. But its whining tone begs some kind of response. The announcement originally was posted on both The Tide and WBACH's website -- it now only appears on WBACH's.

Congress, the record companies, artists and their various lobby groups, in their collective wisdom, have determined that we should pay royalty fees for music played online...

It's true. Rates have risen, as I (and many others) have talked about before. What the announcement doesn't talk about was commercial radio's indifference to it. As others have noted, only NPR really took a stance when the rate hikes were proposed -- the NAB remained curiously silent. And now they have to live with the results.

Yes, the mean old record companies screwed everyone with the help of Congress. But now that the results of commercial radio's inaction have come home to roost, I can only say "boo hoo hoo."

Our website doesn't generate any revenue - $0. Knowing that most radio stations' websites don't generate any revenue, these titans of brilliance have still decided that we should pay based on the possible future revenues of online broadcasting.

Both the Tide and WBACH's websites are remarkably free of advertising, so I have no doubt they generate zero income. But whose fault is that?

Mark Ramsey of Hear 2.0 has been advising commercial radio for some time to understand the importance (and value) of their websites. And Ken Dardis of Audiographics has been doing the same. Online advertising is projected to grow 22% this year alone -- and yet this radio station can't generate any income at all on their website?

What about on-air/banner ad packages? What about using the site as a repository for more info with at least a line listing and a link to advertiser's websites?

Or how about Google AdSense, or an affiliate program like the Commission Junction? That's what we use for this blog and the Gamut playlist. They generate a modest amount of income, but our sites only have a fraction of what WTYD's should be.

It requires some creative thinking, sure. But if a radio station can't figure out how to drive traffic to its site (hint: integrate the URL into your broadcasts) to make it attractive to local advertisers, you can't blame that on the mean old record labels.

Reading this announcement, though, I got the impression that writer doesn't know much about the Internet. After all, this is just a notice. But what if it were rewritten slightly with links? Instead of just whining about Congress, how about providing a link to Savenetradio.org where folks can go and do something about it? No wonder they don't generate any web revenue.

And finally, although the notice initially ran on both WBACH and the Tide's websites, it now only shows on the classical station's. Why?

Because the Tide does have an Internet radio stream. There's a box leading to the Tide's New Music Channel (NMC). No, it's not a stream of their on-air broadcast. It's actually a separate Internet radio stream.

NMC is a service of Customchannels.net. Businesses can sign up for the service, have their logo inserted into the page (thanks to dynamic links) and the customer believes it's originating from the client.

In their info page, they assure everyone that they're paying all of the SoundExchange fees (and apparently can make money doing so -- although that may change once the ax falls).

And ironically, when you first go the Tide's NMC, directly below the station's logo is a banner to save Internet radio (like the one on the top of this blog). Too bad commercial radio chose to ignore it.

- Ralph