Angst in studios over webcasting pact

Pubcasters got lower royalties, but they’re stressed over reporting rules


Published in Current, Aug. 24, 2009
By Karen Everhart

Now that public broadcasting has a webcasting royalty deal with the recording industry, local pubcasters are learning what it requires of them. Many are asking: Is this something we can live with?

Most pubradio stations with web streams will have to file playlists and streaming logs covering eight weeks a year, but the 30 percent of stations with the biggest web audiences will collect data every day for quarterly reporting.

Moreover, the reality of a decade-old copyright law seeped in as local pubcasters reviewed the contract, prompting objections to rules that inhibit them from featuring individual artists or groups within a three-hour time period. The limit was sorely tested this month after guitar innovator Les Paul died.

CPB and SoundExchange, the royalty-collection agency established by the recording industry to distribute payments to labels and artists, announced Aug. 6 [2009] that they had negotiated a new contract covering music royalties from 2011 through 2015.

The deal, similar to the current agreement that CPB and SoundExchange unveiled in January, sets rates that are substantially lower than those paid by commercial webcasters — a nod to pubcasters’ noncommercial public-service mission. The contract also maintains CPB’s historic role as the agency that negotiates and pays royalties on behalf of pubcasting stations.

Both principles have been top goals for pubcasters since 2007, when they began negotiating to create a framework for webcasting royalty payments under a Copyright Royalty Board ruling that gave no special consideration to public broadcasters.

“We think we did pretty well,” says Mike Riksen, NPR v.p. for policy and representation, of the royalty deals finalized this year after nearly two years of negotiations. Pubcasting’s negotiating team, which initially included reps from NPR, CPB and the Station Resource Group, sought to replace a March 2007 CRB royalty formula with one that recognizes the unique noncommercial public-service mission of public broadcasting, he says. “It was our intention to supplant that decision, and in general terms we did that.”

Indeed, local pubcasters aren’t objecting to the rates that CPB will be paying on their behalf — $1.85 million for the agreement covering 2005-2010 and as much as $2.88 million for 2011-2015. Nor do they appear to be challenging the principle of compensating artists and record labels for web-streaming of their sound recordings.

What has freaked many of them is the reporting required of participants in the CPB/SoundEx agreement. “Stations feel that it’s one more burden for which they get nothing,” says Ginny Berson, director of federation services for the National Federation of Community Broadcasters. NFCB produced several webinars this summer to bring member stations up to speed on the royalty agreement. “The whole rollout of this system is very complicated, very difficult and there’s not a lot of clarity about it.”

CPB hired Public Interactive, an NPR-owned web technology unit, to collect music-streaming reports from stations and deliver them to SoundExchange. But the reporting contract wasn’t finalized until late May, just weeks before the system’s first reports were due. By July, only 64 pubcasting outlets had reported data on their 94 web streams, according to Phil Johnson, project manager.

Under the current contract, some 270 stations, or 60 percent of the 450 that are eligible, are required to begin reporting this year.

“We are hoping to double or triple the number of stations for the next report,” Hughes says. PI’s staff has been participating in webinars and making presentations at conferences, “informing people of what they need to do and what the process looks like,” Hughes says. The first step, which most stations hadn’t taken by the July reporting deadline, was signing the agreement.

“We think there’s enough confusion about it that we’ve organized a session at our conference,” says Arthur Cohen, president of the Public Radio Program Directors, which convenes its annual conference in Cleveland next month.

“I don’t think people resist the concept of the agreement, it’s just that tiny operations are stretched thin already,” Cohen adds. “Some stations have no central system of managing and logging music.”

“In public radio, the stations with the biggest staffs tend to be the ones that don’t play music,” Cohen says. Among stations that do, there are relatively few “haves” — big-city classical or Triple A stations — “and then there’s pretty much everybody else.”

“The story in this is how it will affect operations that have four people total,” Cohen says. “It is really a problem for stations that rely on 150 volunteers.”

Then there’s the matter of the Digital Millennium Copyright Act of 1998, law of the land for more than a decade, that gives webcasters a “statutory license” to stream recordings under certain conditions and for fees that were to be negotiated.

One of the less popular conditions imposed by the DMCA, dubbed the “performance complement,” limits the number of songs webcasters can play by a particular artist, or from a specific album or boxed set, within a three-hour period. The rules also restrict certain types of forward promotion and announcements of song titles and artists.

When musical innovator and guitarist Les Paul died Aug. 13, the rules prevented web streaming of the extensive airplay that many stations wanted to give his music, leading some to consider shutting down their web streams so their deejays wouldn’t be hindered.

A manager who objected vociferously on a public radio listserv did not respond to an interview request, and another was unable to discuss the matter without authorization from his licensee, which was not granted.

Ignoring an “in-your-face” law

“These terrible provisions in the DMCA are completely antithetical to what we consider good radio,” says NFCB’s Berson. “Truthfully, a lot of stations have not been following them because we have been told that no one really cares that they’re followed.”

Stations’ contracts with SoundExchange require local pubcasters to affirm that they follow the law’s restrictions, Berson says. Contract language emphasizes the performance complement as “this in-your-face requirement.”

“A lot of the freakout over the DMCA is either a smokescreen or a misinterpretation,” says a manager who requested anonymity. The biggest concern, the manager says, is the DMCA prohibits deejays from playing multiple consecutive tracks by a single artist or group, making it difficult to produce a show that gives in-depth treatment to an artistic body of work. “Those provisions are roundly ignored.”

“We are trying to follow the rules, and my announcers are aware of them,” says Ron Ockert, director of programming and operations for WAER in Syracuse, N.Y. “You can do a tribute, but you can’t blast the music for three hours.” Show hosts “have to be reminded of this, even though we have been following those rules for years.”

“I don’t like the rules either,” Ockert adds. “They’re trying to prevent people from ripping off a bunch of music off the Internet. But aren’t [web users] doing that anyway?”

“What is stimulating the ire is that there was a period of time with no royalty agreement,” says John Crigler, a Washington-based communications attorney who represents many pubradio stations. Though the law was passed in 1998, there haven’t been any “major enforcement actions” of the performance complement, and stations haven’t had to report the music they’ve played.

Staffers at many stations weren’t worried about rules that would be “figured out by someone other than them,” Crigler says.

Hard bargaining over reporting

When the standoff over music royalties began with the CRB’s 2007 ruling, pubcasting leaders were well aware that reporting requirements would be a problem for many stations.

“We did our best to understand the challenges that stations would face and tried to find ways to accommodate that,” says Jeff Luchsinger, CPB director of radio system investments.

“We keep trying to remind everyone that the reason they’re asked to do this reporting is ultimately so that artists receive the compensation they deserve for their work that’s being played on their stations and web streams,” Luchsinger says.

The current contract, which runs through next year, starts by phasing in reporting requirements for the most popular web-streaming stations (contracts compared). Stations with the largest web audiences, defined as those in the top 30 percent of aggregate tuning hours for public radio, have the heaviest reporting workload. They must perform “census reporting” — playlist and usage data covering their streams 24 hours a day, 7 days a week, 365 days a year.

But the vast majority of stations will have to file reports for SoundExchange covering two weeks every quarter.

In the latest round of negotiations for royalties to be paid for 2011 through 2015, CPB negotiated to hold the line for census reporting to those stations in the top 30 percent of streamers, according to Luchsinger. “I think this is a big get for us,” he says. “The copyright royalty board has suggested that census reporting for all is the way they would like to see reporting go in the future.”

Indeed, SoundExchange views census reporting as an “ideal for the future,” says Michael Huppe, general counsel. “Our goal is to move everyone, not just public broadcasters, in this direction.”

“As a conceptual matter, the more data we receive, the better and more accurately we can distribute royalties in a perfect world, the one in which none of us live,” Huppe says. “We are pragmatic people and recognize that certain classes of businesses are working under constraints in this economic climate.”

But activities related to web streaming are computer-based, Huppe adds, and finger-printing technology on sound recordings recognizes playlist data. “We think the world can eventually get there, and technology can eventually get there.”

Another aspect of the 2011-2015 deal that took some hard bargaining for pubcasters was getting agreement to limit royalty payments to pubradio music streams, according to NPR’s Riksen. SoundExchange sought to include sound-recording performances by news and information stations in the contract and in calculations of web listening. In the latest deal, “we are only paying for music webcasting, which we think is the right thing to do,” he said.

Crigler, who participated in early talks with SoundExchange, believes that pubcasters did “as well as we could have” negotiating the royalty pact. “It’s going to be a nuisance to do this reporting,” he says. Whether pubcasters like it or not, they appear to be headed toward census reporting, he believes.

“We recognize that it’s a challenge for a lot of stations to do this, but the fact of the matter is we’re trying to comply with statutory law and an act of Congress,” Luchsinger says. “Even the largest stations have people walking in the door with vinyl and tape recordings, and maybe playing stuff off an iPod.”

Giving listeners what they want

There is an upside for stations that collect this data, says WFMU’s Ken Freedman, even though he says he hates the limits that Washington’s regulatory regime has placed on webcasters.

“It’s a great thing for the recording labels and artists to get attribution in real time, so people can see what’s playing, when it’s playing,” Freedman says. “It’s just expected of digital music services.” WFMU, the freeform music station from Jersey City that is a webcasting pioneer, has been providing real-time playlist information to its web audiences for years off its homegrown database, so providing the data for the royalty agreement isn’t a hardship.

“Regardless of SoundExchange, it’s an excellent idea to keep track of what you’re playing anyhow,” Freedman says. “It’s what our listeners want to know about more than anything else.”

If pubradio stations hope to compete with commercial webcasting services such as Pandora and Last.fm, Freedman adds, “they have to do this—it’s just expected that you’re going to see what’s playing.”

As for the DMCA performance complement that so many broadcasters find objectionable, the only way around it is to negotiate a private deal with the artist or appropriate recording label, according to Huppe at SoundExchange.

Though many think of the rules as a way to prevent copying of sound files on the Internet, the biggest reason for the restrictions is to inhibit what Huppe calls “substitution”—another phenomenon that undercuts music sales. For example, a listener to a digital channel of Billy Joel recordings will have his or her music needs fulfilled by that service instead of buying CDs of Joel’s music.

“That’s why we have the performance complement—to jumble the music and mix up the artists,” Huppe says, so that radio web streams won’t become substitutes for the sales of CDs and digital music downloads. “It is more about the user experience, rather than preventing copying.”

Pubradio’s Deadhead listeners aren’t about to have their weekly user experience interrupted. David Gans, producer of the Grateful Dead Hour, worked out a webcast license with Rhino Records, which manages the Dead’s catalog, and Grateful Dead Productions. “They recognize that it’s in their interests to let this program, and all the other Grateful Dead programs of individual stations, continue,” Gans says.

Gans, a musician and programmer on KPFA in Berkeley, Calif., is incensed by the royalty pact. “The record companies are trying their best to destroy music programming on the radio,” he says. “The sooner the Recording Industry Association of America dies, the happier I will be.”

“As a working musician, it doesn’t serve my interests to have this chicken-shit legislation,” Gans adds. “Radio play is the only way to get people to come out to your shows.”     

Comments, tips, questions? karen((at))current.org
Web page posted Aug. 25, 2009
Copyright 2009 by Current LLC

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Compare the contracts for 2005-10 and 2011-15 arrow >

EARLIER ARTICLES

Webcasters eye royalty bill, looming deadline; music labels stalk new revenue source: over-air broadcasters, spring 2007.

Pubcasters split on whether to join "Day of Silence" protesting royalty rates, summer 2007.

Webcast bill extends negotiations with record industry, fall 2008.

CPB and SoundExchange complete the deal for 2005-10 early in 2009.

LINKS

Broadcast Law Blog from communications law firm Davis Wright Tremaine summarizes latest CPB-SoundExchange agreement.

Public Interactive maintains a blog about SoundExchange reporting and an RSS feed to bring it to you. The deadline for third-quarter reports is Oct. 16, 2009.

PI also has answers to frequently asked questions about SoundExchange agreements. For instance: Stations need not report music used on national shows that they don't produce.

 Having full-time reporting apply only to bigger stations was
‘a big get’ for CPB negotiators,
but SoundExchange says its goal is to
get full-time ‘census’
reports from all stations

 

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