June turned out to be quite a busy and productive month for FMC, with
continued work on media ownership issues, a trip out to Apple’s
campus for an iTunes seminar, and an important settlement in the webcasting
world. We get down to details below.
The congressional response to the FCC’s June 2 vote on media ownership
has been strong and fast. Even before the FCC could release the “official”
regulations, the Senate Commerce Committee had passed S 1046, the "Preservation
of Localism, Program Diversity, and Competition in Television Broadcast
Service Act of 2003". Introduced by Senator Ted Stevens (R-AK),
the legislation rolls back many of the FCC’s June 2 decisions.
In particular, the bill:
There’s a good overview of the Stevens bill here:
Senate Panel Votes to Change FCC Decision
Senate Committee Approves Bill to Roll Back FCC Changes in Media Ownership
Press, June 19, 2003
What Happens Next
The Senate Commerce Committee approved this bill by voice vote on June
19. Now the question is when — and whether — this legislation will be
brought to the Senate floor for a final vote. The bill has 38 co-sponsors
— which is a good number given the speed with which this issue is progressing—
but it needs more for it to pass the full Senate.
If (and when) this legislation passes the Senate, it will move to the
House where Commerce Committee Chairman Billy Tauzin has indicated his
intent to stop the bill from advancing. There are many ways to skin the
proverbial cat, however, and the House will be dealt with at the proper
time. Now, the focus remains getting, and hopefully winning, a vote in
the full Senate on S 1046.
What You Can Do
Call both your Senators and encourage them to co-sponsor S 1046. If they
are already co-sponsors, you should thank them for their support. You
can go to http://www.congress.org
to get contact information for your Senators.
Want to do more? Our allies at Free Press have initiated a "Stop
the FCC" campaign that encourages citizens to contact their members
of Congress and urge them to support various bills like S 1046 that would
roll back the FCC’s decision. The website includes links to members of
Congress and sample messages. You can read more about it here: http://www.mediareform.net/stopthefcc
Here’s some more press about the FMC’s participation in the
broadcast ownership proceeding:
What’s Left of the Dial: One nonprofit helped save radio. Sort of. For
"What Future of Music did was very rare, because generally not-for-profits
are interest groups that don’t have the resources and time to do something
in a comprehensive way," FCC Commissioner Jonathan Adelstein says.
"One day, other groups like this will look back and wish they had
done more. The Future of Music study highlighted and heightened the issue
of huge deregulation so that the majority [of commissioners] couldn’t
stomach deregulating radio any further. Their study was profound because
it hit on something we had on the record. If a lot of our studies had
been trumped by other nonprofits, it might have changed the whole discussion."
By Robert Wilonsky
Observer, June 19, 2003
The station masters
Relaxation of radio ownership laws means that foreign companies will soon
be able to control more British stations. One of those likely to be bidding
is Clear Channel - which some say is responsible for the decline of radio
in the US. Should we be worried?
Guardian (UK) June 16, 2003
Media-Rule Thrill Ride Still Rolling
…The Future of Music Coalition (FMC) hopes Congress will step in to
modify the new FCC rules. "It comes down to what could be really
bad vs. what’s tolerable. A year ago, the talk was all about lifting small
market caps. Today, radio’s the cautionary tale, and the FCC kept existing
radio caps in place," FMC government relations director Michael Bracy
June 07, 2003
As reported in last month’s newsletter (and widely elsewhere),
Apple Computer recently launched a virtual music store called iTunes
where you can buy and download either complete albums or individual
tracks from many major artists of different genres. Single songs are
all priced the same – 99 cents. Albums are priced at a range between
$7.99 and $12.99 but the vast majority are $9.99. There’s no monthly
subscription fee, and no sign up charges.
Right now iTunes is available to anyone with a credit card and a US
billing address. However, at this point, you also need to be a Mac user
running OS 10.1.5 or later. Apple has only a small sliver of the consumer
computer industry — about 3 percent – and even fewer of these
folks have upgraded to the latest Mac operating platform. Despite this,
iTunes had logged over 5 million downloads [as of June 23] since the
store launched in early May. As good as that is, things are predicted
to explode when Apple releases a Windows version of iTunes, which they
said they’d like out before Christmas.
iTunes and Musicians
While iTunes has been heralded in the press as a promising development
in consumers’ access to high-quality and LEGAL digital downloads,
the FMC has many questions about what iTunes means for musicians such as:
Luckily we had those questions and many more answered during a half-day
seminar that Apple hosted at their campus in Cupertino, CA on June 5
to introduce their iTunes Music Store to the independent label community.
Future of Music Coalition representatives Kristin Thomson, Brian Zisk
and Shoshana Samole Zisk were in attendance, along with about 200 independent
label representatives. Please visit the page below to read our detailed
analysis of the iTunes Music Store and, in particular, the effect of
this technology on both independent and major label musicians.
The FMC remains very interested in the iTunes launch and its impact
on musicians. Clearly this is the simplest model yet for consumers to
buy high quality and legal downloads, even if it’s just for Mac
users right now. And, after our trip to Cupertino, it’s also clear
that Apple has set up an agreement that is equitable for labels. However,
we wonder how artists, particularly those signed to major label deals,
will be compensated. This has nothing to do with the arrangement with
Apple, but everything to do with how the artists’ contracts treat
digital download sales. Are digital downloads subject to the same antiquated
and ridiculous deductions like breakage, restocking fees, or “new
technology” fees? Are albums priced lower than the suggested retail
price of around $18 considered a “discount” sale? In addition,
while the iTunes Store is considers the transactions sales, there is
some discussion amongst artists that it might actually be a licensing
agreement, which in most cases would be much more advantageous for musicians
royalty-wise. Musicians signed to major label deals — either now or
in the past – should have similar questions in mind.
Besides coming a giant step closer to the “celestial jukebox”
becoming a reality, the success of iTunes may provide musicians, managers,
and advocates with a window of opportunity to address contract reform.
We urge major label musicians to ask their label representatives about
the rate they’re getting for digital download sales and what deductions,
if any, apply. If it’s in alignment with their terrestrial sales,
think about renegotiating for a higher rate for digital sales. With
no deductions for shipping, storing, breakage, packaging and returns,
the marginal costs of selling songs through virtual stores is almost
nil. As a result major label artists should demand to be compensated
for these sales at a unique and higher rate.
Here’s some recent press about iTunes and other digital download sites:
Downloads chart may signal single’s comeback
By Edna Gundersen
Today, July 7, 2003
Music Biz Seeking Profits at 99 Cents
By Brian Garrity
July 6, 2003
Apple Gets Indie Bands
Stone, June 21, 2003
Top Artists Balking At A La Carte Downloads
Despite the major labels’ success in clearing hundreds of thousands
of tracks for purchase online through services like Apple’s iTunes Music
Store, some top artists continue to resist authorizing the dismantling
of their albums for Internet consumption as a la carte singles.
June 21, 2003
What a Difference 20 Cents Makes
Listen.com says its recent price cut — from 99 cents to 79 cents per
song — has almost doubled the number of tracks burned by subscribers
to its Rhapsody online music service.
July 2, 2003
It’s been a while since we reported on the status of webcasting
and the ongoing debate about payments of performance royalties, so it’s
time for a rundown:
Last February 2002, the US Copyright Office released its recommendations
on webcasting rates and reporting requirements. Following the release,
both webcasters and copyright holders (i.e. labels) mounted campaigns
to express their opposing views on the recommendations, urging their
supporters to register their opinions with the Copyright Office and
their elected representatives.
The FMC filed a number of papers with the Copyright Office during this
period, urging the agency to develop a multi-tiered rate and licensing
structure that distinguished between the various webcasting business
models and encouraged the growth of this emerging media. We also proposed
payments based on percentage of revenue instead of a per-listener payment.
This not only reflected payment models currently under use in the terrestrial
world, but was also scalable according to the abilities of webcasting
stations to generate revenue.
Read our summary proposal filed with the Copyright Office here
Then last June, the Librarian of Congress released his decision on the
webcasting rates based on the findings of the Copyright Arbitration
Royalty Panel (CARP). Briefly, the Librarian rejected the CARP’s
findings and cut the performance royalty rate in half; from .14 cents
to .07 cents per “performance”.
Overall, reaction to this decision was negative. The RIAA denounced
the rate reduction, saying that is “simply does not reflect the
fair market value of music as promised by the law”. Small webcasters,
on the other hand, argued that the installation of this per-performance
rate, which was retroactive to October 1998, would set rates so high
that they would hasten the destruction of the emerging webcasting world
and force many small webcasters out of business. Indeed, hundreds of
small/college webcasters took down their streams following the June
2002 decision, unsure about their ability to pay the performance royalties.
Then in November 2002, based on the request of small webcasters for
relief, Congress passed the “Small Webcaster Settlement Act”
(SWSA). Among other things, the Act allowed copyright owners [labels
represented in negotiations by SoundExchange] to offer webcasters a
percentage-of-revenues royalty rate, essentially allowing the parties
to mutually agree to override the “per-performance” rate
handed down by the Copyright Office in June 2002. It also suspended
all royalty payments due from noncommercial webcasters until June 30,
2003, giving both sides time to work out a new voluntary royalty structure,
and added a new definition of "noncommercial" that permitted
webcasters who were for-profit entities to file for nonprofit status,
as long as they had a "commercially reasonable expectation that
such exemption shall be granted."
Since the passage of the SWSA, groups of webcasters and copyright owners
[labels and SoundExchange] have been negotiating privately to come to
reasonable terms of payment for the use of music. But, instead of setting
a rate that applies across the board to all webcasters, rates have been
set on various tiers that take into consideration the size of the webcasters’
audience, their revenues, and their status as a commercial or nonprofit
entity – a lot like what the FMC was proposing last spring.
Michael Papish, CEO of Media Unbound and a policy analyst for college
station WHRB and the Intercollegiate Broadcast System, has been an active
participant in these negotiations and has distilled the various agreements,
which are now posted on the FMC website here
Kurt Hanson’s Radio and Internet Newsletter also has a chart showing
the various rates here
as well as some great analysis of the webcasting negotiations.
In June, the recording industry reached a milestone settlement when
it finished its negotiations with college and noncommercial broadcasters.
Under the terms of the agreement, college stations will pay a flat rate
of $250 in 2003, which will increase to $250 or $500 in 2004 depending
on the college’s enrollment. Other noncommercial broadcasters
pay about this much as well.
The agreement with college and noncommercial webcasters should allow
those webcasters to start streaming again. There are, however, a number
of points in these negotiations that will make it difficult for some
small webcasters to grow significantly without paying a much greater
rate. In addition, the reporting requirement that was adopted by the
Copyright Office has been waived for college and non-commercial webcasters
in 2003 and 2004. While the FMC understands that the original reporting
requirements were overly burdensome for small stations, we are hopeful
that the small webcasters and record labels will continue to work together
– as outlined in their agreement — to establish a simple but
sufficient set of reporting requirements that will ensure that all musicians
are compensated directly for songs played.
Here are a couple of articles about the college settlement:
College Radio Will Stream On
A deal between the recording industry and noncommercial webcasters will
keep more college stations online, but DJs are still limited in terms
of how they can arrange their playlists.
By Katie Dean
June 5, 2003
College, Noncommercial Webcasters to Pay Discounted Royalty Rates
The recording industry has granted college radio stations and other
noncommercial broadcasters deep discounts on the fees they pay for transmitting
music over the Internet, wrapping up a series of hard-fought deals with
By Jon Healey
Angeles Times, June 4, 2003
Non-Comm Streamers Reach Royalty Deal with SoundExchange
By Paul Maloney
and Internet Newsletter, June 2, 2003
In the next newsletter we’ll update you on the status of Low Power
Radio and the results of the “interference testing” that
was conducted by the FCC to determine whether LPFM stations could be
licensed in more populated areas.
As reported in last month’s newsletter, the California State Senate
passed SB 1034. Introduced by Senator Kevin Murray, the bill “would
specify that the obligation of a recording company to accurately account
for royalties earned under a recording artist contact is a fiduciary
duty.” In other words, record labels would have to account properly
to their artists. There’s a great analysis of the bill here.
The next step for this bill was to move onto the California Assembly
for a vote. However, on July 3, Senator Murray’s office announced
that SB 1034 was being tabled until January 2004. Murray said he pulled
it before a scheduled Assembly vote because many musicians and artists
who would have supported the bill’s passage were unavailable to
lobby in the Assembly because of summer concert and touring schedules.
What You Can Do
This new timeline gives musicians who live in California even more time
to demonstrate their support for SB 1034 by writing a letter to Senator
You can review a sample letter here
Send letters to:
Honorable Kevin Murray
California State Capitol
Sacramento, CA 95814
Senator Murray can be faxed at: 916.445.8899
The FMC continues to work with AFTRA, AFM, Artists’ Empowerment
Coalition, Recording Artists’ Coalition, California Labor Federation,
Department of Professional Employees of the AFL-CIO, Music Managers’
Forum, Professional Musicians Local 47, Screen Actors Guild and many
individual recording artists to express support for the passage of these
new accounting rules, both in California and in other states. We’ll
keep you posted.
June also saw the announcement from the RIAA that they were
ratcheting up their legal strategy to stop illegal music downloading
by suing individuals who were frequent downloaders of music off of illegal
The articles below describe the RIAA’s new legal strategy, the
backlash that they may face from consumers who are wrongly targeted,
and the snickering in the technology community that threatens to make
the RIAA’s job even tougher by hiding sharers’ identities.
The FMC thinks that the RIAA’s policy of suing individual users
was not unexpected, yet will most likely be less than productive in
stopping illegal downloads. Folks who download materials illegally have
expressed a sense of imperviousness about the lawsuits, which only makes
them more determined to download files this way. This, plus the general
concept that “artists don’t see that money anyway”
make this a very unsympathetic strategy. The FMC instead urges the recording
industry to invest more time envisioning a better future in digital
downloads and webcasting, where it’s possible to build better
structures for selling and promoting music. The vast majority of consumers
WANT to buy music legally, but up to this point the major labels have
been reticent to license their material to sites where legal downloads
could happen. This is beginning to change, thankfully, with the increased
profile of iTunes, Rhapsody, Emusic, Musicnet and Pressplay. While the
benefits of this strategy might take a few years to see, the industry
needs to embrace the digital future.
Jenny Toomey on NPR’s Talk of the Nation: Music File Sharing
Last week, the recording industry announced plans to sue people who
download music without paying. Since then, fans continue to swap songs
illegally and there’s a more intense effort to create file-sharing technology
that keeps the user anonymous. Join Lynn Neary for a look at the future
of music on the Internet.
Talk of the Nation, July 1, 2003
Napster Creator May Be Set for Comeback
By Joseph Menn and Jon Healey
Napster the brand is going legit under new owner Roxio Inc.
Angeles Times, July 7, 2003
Giving Sharers Ears Without Faces
In the wake of the recording industry’s threats to sue heavy users of
peer-to-peer file-sharing systems, developers are fighting back, promising
to implement features that will hide sharers’ identities.
By Xeni Jardin
July 1, 2003
Labels May Face Risk in Piracy Suits
By Jon Healey
As the record industry prepares to haul thousands of alleged music pirates
into court, its biggest risk may be suing the wrong people — and
losing the support of leading members of Congress in the process.
Los Angeles Times, June 27, 2003 http://www.latimes.com/business/la-fi-music27jun27222422,1,3266286.story
Labels Will See Music File Sharers in Court
By Jon Healey
Unable to stamp out Internet music piracy through education or threats,
the record labels on Wednesday said they will start suing thousands
of people who share songs online.
Los Angeles Times, June 26, 2003 http://www.latimes.com/business/la-fi-riaa26jun26000420,1,6455638.story
Are You in RIAA’s Cross Hairs?
The Recording Industry Association of America warned it will aggressively
pursue big-time music file sharers in court. The question is, just who
qualifies? Are you one, punk?
By Katie Dean
Wired, June 26, 2003 http://go.hotwired.com/news/digiwood/0,1412,59392,00.html/wn_ascii
Hatch on illegal downloading: Destroy their computers
The chairman of the Senate Judiciary Committee said Tuesday he favors
developing new technology to remotely destroy the computers of people
who illegally download music from the Internet.
Associated Press, June 17, 2003 http://www.salon.com/tech/wire/2003/06/17/hatch_download/index.html
Verizon Can’t Protect Traders
An appeals court has refused Verizon’s request to protect its customers’
identities, and the company must now reveal the names of two customers
accused of trading hundreds of songs online. The recording industry
will likely pursue legal action against the customers.
Wired.com, June 5, 2003 http://go.hotwired.com/news/digiwood/0,1412,59112,00.html/wn_ascii
There is also a petition started by musicians who object to the RIAA’s
actions that you might be interested in signing http://www.copyleftmedia.org.uk/justsayno/
Singer Elvis Costello Defends Outspoken Artists
"We all live in fairly dangerous times in terms of freedom
of speech and freedom of expression," Costello said. "A lot
of the songwriters that I’ve admired and learned from … are people
who spoke in matters of conscience as well as matters of the heart.
I think that it’s essential that we defend that right."
May 21, 2003
A TiVo Player for the Radio
Several new devices let users record programs and listen to them
whenever they want. Like digital video recorders, these digital audio
recorders let listeners fast-forward past commercials.
By Elisa Batista
May 12, 2003
P2P Whipping Boy: Know the Risks
Sued by the music industry trade group RIAA for running a ‘Napster-like’
network on campus, Joe Nievelt agreed to pay $15,000 to settle the lawsuit.
But the Michigan Tech junior says he doubts his high-profile case will
have much impact on file trading.
By Katie Dean
May 10, 2003
Book Excerpt: All the Rave
What were the behind-the-scenes machinations that led to several
music publishers suing Bertelsmann earlier this year? In this excerpt
from All the Rave: The Rise and Fall of Shawn Fanning’s Napster,
author Joseph Menn explains how the German publishing conglomerate’s
alliance with Napster went wrong.
May 6, 2003
School Blocks Out File-Trading
Amid growing pressure from the Recording Association of America
to stamp out illegal file-trading on university campuses, a New Jersey
school takes matters into its own hands.
By Katie Dean.Wired.com,
May 3, 2003
Jenny Toomey has spent the last month preparing for the June 2nd
vote. She ran up against ex FCC Commissioner Dick Wiley on CNN and
discussed Clear Channel’s desire to buy stations in England on the
BBC. She participated in a conference call/press conference with Michael
Mills of REM and Stone Gossard of Pearl Jam as well as Robert McChesney
and Common Cause. She also had a very inspiring weekend at the second
Annual Tape Op conference in Portland, where against all odds she
enjoyed a power point presentation documenting the history of music
and technology. She is currently expecting an iPod.
Kristin has been trying to keep up with the furious pace of life
these days, with an FCC on the verge of massive rule changes and an
infant thats quickly moving from crawling to toddling. Kristin
is heading out to Silicon Valley this week for a seminar about iTunes
hosted by Apple. Exciting! More about this in the next newsletter.
Brian’s been looking at situations where major media companies
use their size and legal resources to unconscionably prevent artists
from proceeding with their recording careers. More will be revealed
on this shortly.
And who ever said FCC rulemakings can’t be fun? Since the FCC
launched their review of media ownership rules late last year, we’ve
released a study, held a summit, testified before the Senate and the
FCC, had a baby, survived snipers, "code orange" and a war,
briefed dozens of reporters and policy makers and coordinated efforts
with thousands of activists who share our concern both about the policy
direction of the FCC and the process they chose to employ. We have
been inspired by the leadership of FCC Commissioners Copps and Adelstein,
not to mention the over half-million comments received at the FCC.
Now, as baby Owen learns to sleep through the night, Michael hopes
that his reoccurring dreams about 3-2 votes and FCC process will be
replaced with visions of Redskin touchdowns dancing through his head.
Otherwise, Michael is excited by the prospect of taking the media
ownership fight to Capitol Hill, both in terms of contesting the plan
adopted by the FCC on June 2 and working with Congress to allow LPFM
licenses in urban markets.
If you have any feedback, questions, or suggestions please send an
email to suggestions [at] futureofmusic [dot] org,
and let us know how we’re doing.
Thanks for your support and see you next time.