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Adelstein: Court May Overturn "Broadcast Flag" FCC Commissioner Jonathan Adelstein tells Billboard Radio Monitor and a small group of industry lobbyists that he and his fellow commissioners may be "starting from scratch" on a policy to protect digital audio and video content. His statement echoed what he said earlier in the day, when he delivered the morning keynote address at the Future of Music Coalition "Policy Day" April 12 in downtown Washington, D.C. Back in 2002, Billboard reported that the proposal for an "audio broadcast flag" was presented by the RIAA as a way to protect digitally delivered content. The so-called flag would designate digital streams as broadcast-only, triggering a response within electronic devices and preventing the content from being downloaded. Last October, a coalition of nine public-interest groups asked the federal court to overturn the "broadcast flag" policy that the FCC had implemented. Adelstein told the audience during a Q&A session after his keynote that the Court of Appeals for the D.C. Circuit was "very critical" of the FCC’s "broadcast flag" policy and implementation. "We’re not the Copyright Office," he said. To emphasize the Court’s thinking on the issue to his audience, Adelstein paraphrased the justices as asking: "What are you going to regulate next, washing machines?" One of the primary themes of Adelstein’s address to the FOMC is that the FCC can help promote and develop more grassroots opportunities for artists to deliver their music to the public, by creating policies that promote open access to the Internet, by developing low-power FM and by ushering in an HD Radio and digital radio policy that provides "new opportunities for expression." The relevance to musicians, he said, is that "digital radio gives new opportunities for expression that aren’t heard on commercial radio. Here’s your opportunity to get in on the ground floor," he said, urging the audience to comment on the open docket item the FCC has concerning broadcast localism. Broadband over power lines, or wireless broadband access to the
Internet via some current TV spectrum should also be of concern to
musicians, Adelstein said: "The more broadband pipelines that
are out there, the more musicians can share their work."
Satellite radio and other advances in technology undoubtedly have given terrestrial radio a run for its money, but industry experts argued Tues. that the very challenges of the medium also offer opportunities for broadcasters in the digital age. Panelists offering often-divergent views from traditional radio, high tech and labor managed to agree on one thing at the Future of Music Coalition's annual D.C. Policy Day: It's a different world than when the FCC began regulating the airwaves decades ago. Several panelists, including FCC Comr. Adelstein, griped about the state of terrestrial radio in the nation's capital in particular. Adelstein disclosed he recently switched to satellite radio after getting frustrated with his options in the D.C. market: "I was a big radio listener... [but] I got tired of the same songs over and over again and the lack of cutting edge material." He said he hopes the digital transition will reinvigorate the industry -- and create new outlets for emerging artists to showcase their talent. Since broadcasters that go digital will be able to create new channels more easily on AM and FM dials, he expressed optimism that new channels will be launched that cater to specific audiences instead of all stations targeting "the lowest common denominator." SoundExchange Exec. Dir. John Simson seconded that: "We have the worst radio in Washington -- with a few exceptions, mostly talk and NPR." In fact, he said there are few major markets that embrace the kind of innovative formats that make Seattle stations like Mays' unique. But Chris Mays, program dir. for Seattle's KMTT, put a positive spin on the news, noting that broadcasters -- even conglomerates such as Clear Channel -- are reintroducing niche stations that are growing in popularity as they stray from the national hit playlists. Satellite radio will reach more than 20.1 million U.S. households by 2010, according to an April 13 Forrester Research projection, up from a reported 4.5 million subscribers at the end of 2004. The report, which examines the emerging digital audio markets, found that satellite radio subscriptions grew 150% in the U.S. 2003- 2004. The report also predicts that nearly 1/2 of U.S. households will be tuned into online radio by the end of the decade, as portals such as AOL, Yahoo! and MSN increase programming and traditional broadcasters move some programming online. XM made moves toward an online adventure last week, announcing April 11 it will debut a co-branded online radio service this summer with AOL as part of AOL.com's transformation into a next-generation Web portal. Traditional radio is nowhere near its final resting place, argued Mays. "Radio is absolutely not dead. Broadcasters are ready to move and react and grow as the marketplace dictates," she said, citing some stations' decisions to shift programming away from "Top 40" formats to capture growing niche markets like Hispanic populations. "At our best, local radio broadcasters are a mirror of the community," Mays said: "The ones that are the most successful are ones that are able to capture the spirit and values of the local community and show them back to you." The prominence of satellite radio doesn't spook Mays. An informal poll of her listeners indicated all were aware of XM and Sirius but only 4% intended to subscribe. MP3 players and iPods are another matter. Mays said 20% of her listeners owned iPods or other portable digital music devices and 43% planned to buy one in the next year. She said terrestrial radio is "leapfrogging" satellite radio, taking the medium from "from broadcasting to me- casting... People would rather pay for things they can create themselves." By Forrester's account, podcasting will see significant growth by 2010 -- reaching 12.3 million households as MP3 adoption climbs and broadband reaches 62% of homes one way or another. "Consumers want to listen to what they want, when they want, on the device of their choosing. New formats like online radio and podcasting... give consumers more programming and ultimate flexibility," said Forrester Research Vp Ted Schadler in the market analysis. Radio and music executives need to "shift
their thinking to embrace new audio
delivery methods," said Schadler. Radio should "take note
of the lessons
learned in the TV industry when cable entered its programming mix" to
succeed in
today's fragmented, consumer-driven market, the Forrester report
said: "Music
and radio executives must adopt subscription-based models, on-demand
delivery,
and ad targeting strategies for radio to successfully maximize its
new formats." Challenge from Satellite May Improve Terrestrial Radio, Panelists
Say Advances in technology undoubtedly have given terrestrial radio a run for its money, but industry experts argued Tues. that the very challenges embedded in the next generation of the medium also provide opportunities for broadcasters in the digital age. Panelists offering often-divergent views from traditional radio, high-tech and labor arenas managed to agree on one thing at the Future of Music Coalition's annual D.C. Policy Day: It's a completely different world than when the FCC began regulating the airwaves decades ago. Traditional radio is nowhere near its final resting place, argued Chris Mays, program dir. for Seattle's KMTT. "Radio is absolutely not dead. Broadcasters are ready to move and react and grow as the marketplace dictates," she said, citing some stations' decisions to shift programming away from "Top 40" formats to capture growing niche markets like Hispanic populations. "At our best, local radio broadcasters are a mirror of the community," Mays said: "The ones that are the most successful are ones that are able to capture the spirit and values of the local community and show them back to you." The prominence of satellite radio doesn't spook Mays. An informal poll of her listeners indicated all of them were aware of XM and Sirius but only 4% intended to subscribe. MP3 players are another ball of wax. She said 20% of them owned iPods or other portable digital music devices and 43% planned on buying one in the next year. She said terrestrial radio is "leapfrogging" over satellite radio, taking the medium from "from broadcasting to me-casting... People would rather pay for things they can create themselves." Several panelists, including FCC Comr. Adelstein, griped about the state of terrestrial radio in the nation's capital in particular. Adelstein admitted he recently switched to satellite radio after getting frustrated with his options in the D.C. market: "I was a big radio listener... [but] I got tired of the same songs over and over again and the lack of cutting edge material." He said he hopes the digital transition will reinvigorate the industry -- and create new outlets for emerging artists to showcase their talent. Since broadcasters who go digital will be able to create new channels more easily on AM and FM dials, he expressed optimism that new channels that cater to specific audiences will be launched rather than all the stations targeting what he called "the lowest common denominator." SoundExchange Exec. Dir. John Simson seconded that: "We have the worst radio in Washington -- with a few exceptions, mostly talk and NPR." In fact, he said there are very few major markets that embrace the kind of innovative formats that make Seattle stations like Mays' so unique. But Mays put a positive spin on the news, noting that broadcasters -- even mammoth conglomerates like Clear Channel -- are reintroducing niche stations that are growing in popularity as they stray from the national hit playlists. AFTRA's Ann Chaitovitz and RIAA Gen. Counsel Steve Marks had a very different beef with terrestrial radio. They reignited the longtime grievance expressed by record labels and labor unions that radio pays the songwriters for their lyrics but stations are exempt from compensating artists for their sound recordings. "I find it morally wrong, it's economically wrong and it does a disservice to artists and to the culture and to society as a whole," Chaitovitz said: "It's wrong that our artists are building your business. They should be paid." Chaitovitz said the U.S. is the last country in the industrialized world that doesn't have a model to pay artists for radio play, and her organization has been fighting for this since the 1950s. The argument that radio is an important promotional vehicle for artists is no longer a valid approach, they said. "We 've moved into a different world now [with] different business paradigms. People are no longer buying products, people are buying listens," Chaitovitz said, and radio stations give listens away for free without promoting record sales. Marks said changing the exemption for broadcasters has never been
more important than now, since all subsections of the music industry
are moving away from their traditional business models. Record sales
alone won't suffice for providing proper returns for the artists,
he said: "As sales come down, more and more its important that
you have those different revenue streams." Despite the outcry
for change, there is no clear strategy for bringing American radio
broadcasters into the global payment regime and deciding what type
of reimbursement model is fair, he said. "You're talking about
an industry that has generally a profit margin of about 40% so there's
no question that broadcasters have the ability to pay -- they're
not a start up business." The standard statutory license agreement
for subscription Web services use a standard of 10.9%, he said: "If
that's good enough for subscription webcasters to pay, it's good
enough for the broadcasters to pay." Mays wouldn't engage in
an argument over how artists are compensated because she said she's
a creator, not an attorney: "I'm certain it will be figured
out." -- Andrew Noyes DIGITAL CONVERGENCE: PANEL: Digital, Satellite Radio; Transforming
Music Distribution Podcasting, satellite radio and the impeding transition to "high-definition" digital
radio have the potential to change the landscape for music distribution
as much as peer-to-peer software like Napster and its successors,
a panel of experts agreed Tuesday. At a panel on digital audio broadcasting
at a policy summit of the Future of Music Coalition, it was apparent
that radio broadcasters and record labels alike are struggling to
find stability in a digital music landscape roiled over the past
several years by radio consolidation, peer-to-peer services, and
new transmission technologies that allow music to be wirelessly distributed
to cell phones. One reason is the lingering bitterness between broadcasters
and record labels over the anomalous copyright situation in which
composers, but not performing artists, are paid royalties when analog
radio stations broadcast music. "It is morally wrong, it is
economically wrong, and does a disservice to the culture," said
Ann Chaitovitz, national director of sound recordings for the Association
of Federated Television and Recording Artists. "You pay the
song writer, but you don't pay for the performance." Broadcasters
have replied that air time leads to record sales, and hence is a
promotional medium. In 1995, Congress extended digital performance
royalties for songs played over cable television systems, satellite
radio, and webcasters, but analog radio remains exempt. "There
is no question but that broadcasters have the ability to pay," said
Steven Marks, senior vice president at the Recording Industry Association
of America. "They have a profit margin of 40 percent." He
said the 10.9 percent of revenue applied to webcasters should be
extended to traditional radio. The situation for radio and webcasting
is different from that of records and digital downloads that go onto
portable music devices like Apple's iPod. Since those digital copies
are considered "permanent" and not "streamed," recording
companies and artists do collect a performance royalty on those songs
-- provided they are not traded over P2P services like Grokster.
Further, the proliferation and convergence of digital technologies
including satellite radio, Internet radio, and "podcasting," or
using a digital music device like Apple's iPod to download and listen
to music, has muddied the traditional boundaries. Marks took aim
at webcasters who do not employ technologies to defeat "stream-ripping," the
practice of making a permanent copy of a stream. "These technologies
need to be deployed by webcasters so that they are performance service
and not download service," he said. Chris Mays, vice president
and program director of KMTT-FM in Seattle, appeared taken aback
by the attacks, and referred back to the "role and relationship
between radio and musicians. We are the place where [listeners] hear
it first. We have the ability to build musicians' careers," which
is why air-time for new artists is so important to KMTT, Mays said.
Chaitovitz replied that such air-time has become more limited in
an age of radio station consolidation. But moderator Jim Griffin,
CEO of Cherry Lane Digital, questioned whether the proliferation
of digital music distribution vehicles made the argument for FCC
intervention in the media marketplace irrelevant. 'Grokster' Case Could Lead to Active Inducement Standard The U.S. Supreme Court's consideration of MGM v. Grokster -- a landmark copyright case heard March 29 -- could lead justices to request a briefing on "active inducement" before they rule. As a concept, "active inducement" - indirect encouragement of criminal activity - comes from the same part of the legal code the high court acted on in 1984's Sony Betamax ruling. However, the law doesn't define the term, and Public Knowledge Pres. Gigi Sohn said Tues. she doesn't think oral argument gave justices the answers they needed. Friend-of-the-court briefs filed in Grokster advised the court on how to define active inducement. Speaking at a Future of Music Coalition forum, Sohn said if all parties to the case could agree on what constitutes active inducement and proffer that definition to the court, it would be part of the eventual decision and become an industry standard. The high court "really understood that the Sony doctrine is critical to promoting technological innovation," but the justices were troubled by the perceived business models at Grokster and Morpheus, Sohn said. Several justices asked about active inducement -- profiting by encouraging users to download protected music illegally -- but Sohn said neither side delivered solid answers. Entertainment industry attorney Donald Verrilli -- whose clients probably would benefit from a convincing position on active inducement -- was surprisingly uninterested in the topic in court, Sohn said, musing that the facts of the case, most of which remain sealed, might not have met the requirements for active inducement anyway. The court may ask the parties to provide a proper active inducement standard, after which the case could be remanded to lower courts for further litigation, Sohn added. The wait by copyright holders and the technology industry for a
Supreme Court decision expected by June perplexed moderator Bill
Thomas. The former ASCAP chief of staff said: "The decision,
no matter how it comes down, isn't going to change anything." Thomas
called the wait & see approach the "dumbest thing I can
think of." Sohn added: "Even if we do have an active inducement
standard, smart people will build around it." The industries
in question then would be back where they are today -- with unhappy
artists and a handful of technology companies profiting on ads run
by P2P platforms, she said. If an active inducement standard is set,
it will be hard to apply and will make Washington technology lawyers'
lives "more complicated for sure," said Debevoise & Plimpton
attorney Jeffrey Cunard. But the key aspect of Grokster is that it
has unfolded on a national stage, stirring discussion about what
copyright law should look like, Sohn said. -- Andrew Noyes A consolidated U.S. media market increasingly
is susceptible to manipulation,
not only by corporate owners, but by govt. -- a trend that has had
a bad,
homogenizing effect on the music industry, Rep. Watson (D-Cal.),
told the Future
of Music Coalition Tues. Watson, who chairs the House Entertainment
Caucus, said
nationwide corporate radio playlists that "repeat songs over
and over again"
shortchange independent musicians and keep the public from hearing
diverse music
and new artists. "Seeking out original sound on the radio today
is like looking
for prime time television without a reality show," she said: "Both
are results
of a profit-driven approach to programming that emphasizes the bottom
line at
the expense of creativity." As independent radio stations vanish,
so does
coverage of local interests and news and "in some ways, the
local standards seem
to go into oblivion," Watson said. She noted that since the
Telecom Act, the
number of radio station owners has dropped 34%. In programming, Watson
said,
proliferation of partisan talk radio has "left no middle ground
for actual
substantive discussions of public policy." "Our radio broadcasting
sector is
facing a crisis where consolidation has not only killed the radio
star, but is
close to destroying the entire platform for free expression of ideas." Saying
the Bush Administration has capitalized on a media market in "dire
need of
proper checks and balances," Watson claimed more than 20 federal
agencies and
offices have spent more than $250 million to produce "fake news
clips" and hire
"so-called commentators to secretly promote the White House's
priorities." Watson likened current legal and legislative debates
over the evolution of TV,
radio and online media to previous battles over traditional media.
She said the
main issue is how the nation copes with monopolies in artistic spheres.--AN
Congresswoman Says Media Concentration Opens Door
to Stale Culture, Big
Brother A consolidated U.S. media market increasingly is susceptible to manipulation, not only by corporate owners, but by govt., Rep. Watson (D-Cal.), told the Future of Music Coalition. Watson, who chairs the House Entertainment Caucus, said nationwide corporate radio playlists that "repeat songs over and over again " shortchange independent musicians and keep the public from hearing diverse music and new artists. Saying the Bush Administration has capitalized on a media market in "dire need of proper checks and balances," Watson claimed more than 20 federal agencies and offices have spent more than $250 million to produce "fake news clips" and hire "so-called commentators to secretly promote the White House's priorities."
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