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Waging War Over The Net Waves
by Andrew Noyes
If the Internet radio industry loses its fight against a forthcoming royalty rate hike it would not be due to a lack of trying. Critics of the Copyright Royalty Board's decision to raise fees paid to music labels through 2010 have led an aggressive lobbying effort in the halls of Congress and have mobilized millions of supporters online in a matter of weeks.
In March, the board set a minimum fee of $500 per channel, per year, while larger webcasters that exceed the usage limitation covered by the flat $500 fee also would face additional royalty fees.
Since then, high-tech executives, musicians and artists who infrequently visit Washington have participated in a series of Capitol Hill visits. Legislation that would reverse the fee increase, H.R. 2060, has garnered more than 100 co-sponsors and a companion measure is gaining steam in the Senate.
The issue has resonated outside the Beltway too. It was a topic of discussion at the annual South by Southwest music festival in Austin, Texas, in March and at the New Orleans Jazz and Heritage Festival last month. A handful of jazz music greats even sent a letter to House Judiciary Committee Chairman John Conyers, D-Mich., urging him to fight the board's ruling.
A grassroots group of webcasters, artists, and listeners known as SaveNetRadio has been the driving force behind the wonky warfare. The campaign, which brought on public relations firm Qorvis Communications to help spread the word, promptly launched an online blitzkrieg to spur public outcry and urge congressional action.
Jake Ward, a political communications guru who previously served as spokesman for Sen. Olympia Snowe, R-Maine, has become the face (and voice) of SaveNetRadio. He has participated in countless interviews, recorded public service announcements and helped conjure up a massive Web-based movement.
Congressional staffers, who have taken hundreds of meetings with SaveNetRadio lobbyists, have called this the "grassroots campaign of the year," Ward said. Until the immigration debate emerged, Web radio-related calls from constituents to key Hill offices were second only to complaints about the Iraq war, he said.
Roughly 60,000 telephone calls have been made to members of Congress by supporters of SaveNetRadio and more than 400,000 letters have been sent to lawmakers in less than a month, Ward said.
One hired gun, who lobbies on a variety of issues, said every office she has visited on behalf of SaveNetRadio has heard of the Internet radio kafuffle. "The interesting thing is that there are members we haven't visited who are signing onto the bill," she said. "That shows that the grassroots are driving this issue."
Ward attributes the campaign's success to "the intensity and loyalty of Internet radio fans" and the unique relationship between webcasters and listeners. Web radio subscribers are generally receptive to "a call to action" -- especially when the topic is "something that offends the fairness of most people. That incites people to become very passionate," he said.
Targeted Approach
In the same way that a political campaign would target a voter based on demographics, SaveNetRadio has found ways "to speak to fans of different genres of music," Ward said. "We've tailored our method of getting the message to them based on the audience."
Internet radio services themselves have reached out in various ways. Some have gotten support for the effort by sending mass e-mails to subscribers. Others have run SaveNetRadio audio and video public service announcements and posted ads for the group on their Web sites.
The coalition has become "a living, breathing, growing force," Ward said. "We pick up tens of thousands of people every day."
Watching the campaign unfold "has been a preview of what the future of advocacy campaigns looks like," said Nicco Mele, who worked as webmaster for former Vermont Gov. Howard Dean's failed bid for the Democratic presidential nomination in 2004.
Smart campaigns will be "built around local efforts, heavily reliant on existing social network platforms like Facebook and, more than anything else, [will be] fast and furious," said Mele, who is president of the Internet strategy firm EchoDitto.
David All, a new media adviser for conservatives, said SaveNetRadio "recognized that the only way they were going to succeed was by not only including listeners, but broadcasters, musicians and others, so they got the entire community to take action."
All, who previously served as a spokesman for Rep. Jack Kingston, R-Ga., said SaveNetRadio embraced a "very smart strategy" of pairing traditional lobbying efforts with the power of online community building.
"One net radio listener in a coffee shop in Anywhere, Ohio can connect to millions of [like-minded] people... to stand up and make a difference," he said. "It's coalitions like this -- that realize they need to make an impact quickly and effectively -- that get the attention of members of Congress."
The campaign also has taken to the courts. Critics of the board's ruling, led by the Digital Media Association, filed a motion for an emergency stay of the rate hike in the U.S. Court of Appeals for the D.C. Circuit last week. If unstopped, the new royalties take effect July 15.
The strategy by all the critics of the board's ruling has "always been a multi-pronged approach," said Mike Riksen, National Public Radio's vice president for government relations. "We knew we would have a legal process underway, and given the rather dramatic departure from past precedent, we had a political and legislative path to pursue."
Riksen added that "webcasting of music and the use of the Internet and digital media technologies are a big part of what the future of content distribution is all about. In public radio, we bring to the domain of webcasting to artists and musicians whose works aren't found elsewhere."
Taking Issue
Not everyone has praise for SaveNetRadio. The organization has "built a house of cards, and they've done it with misrepresentation of the facts and by misleading people," said Richard Ades, a spokesman for digital music royalty collector SoundExchange. The group has gotten the backing of numerous artists but was accused last week of not telling the whole truth when recruiting.
Music industry attorney Jay Rosenthal, who is a board member of SoundExchange, said two Washington-based bands that he represents were allegedly duped by the group. One did not provide a testimonial to SaveNetRadio when asked and the other had their statement pulled from the alliance's Web site.
"For a while, they were claiming to be all about small webcasters," Ades said, but the group is actually bankrolled by industry giants like America Online, Microsoft and Yahoo. SaveNetRadio's campaign "really isn't about small webcasters at all. There's a lot of smoke and mirrors," he said.
SoundExchange ran a check of the several hundred artists who provided testimonials for SaveNetRadio's Web site and found that 90 percent of them "did not receive one penny of royalties in 2006," Ades said. "That means either they're not being played by these radio stations that claim to be paying them or if they are being played, they're not getting paid."
It is possible that some artists aligned with SaveNetRadio have never received royalty payments, Ward said, "but there is no question that SoundExchange has collected royalties in their name."
"Every webcaster that has joined the SaveNetRadio coalition has paid their royalties, and every artist has a vested interest in the survival of Internet radio," he said.
Ades also pointed out that LastFM, which was once a smalltime outfit recently got bought by CBS for $280 million. LastFM paid royalties as a small webcaster for the last few years and built a booming business on artists' music, he said. "But artists don't get one dime from the sale of LastFM."
Meanwhile, the bills pending before Congress "not only gut the CRB ruling, which was a very comprehensive decision based on tons of evidence, but they would reduce payments to artists by 75 percent," Ades said. SaveNetRadio proponents "are already misleading musicians, now they're misleading lawmakers."
Several stakeholders in the debate told Technology Daily that hearings are expected to take place in the coming weeks. "When Congress looks behind the curtain they're going to see what's really going on here," Ades said.
The royalty collector offered a revised fee structure last week to noncommercial stakeholders, including the Corporation for Public Broadcasting, NPR and college and religious broadcasters. They made a similar offer to small commercial webcasters the week before.
Lawmakers will then see that SoundExchange has made good faith efforts to offer lower rates for noncommercial and small webcasters, "which is ostensibly what this whole campaign is about," Ades said.
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