[rumori] Internet radio, Subscriber music services, AOL (fwd)

From: Steev Hise (steevATdetritus.net)
Date: Sat May 18 2002 - 17:51:30 PDT

3 wall street journal articles from wednesday, all about Internet
music IP issues.....


---------- Forwarded message ----------
Date: Wed, 15 May 2002 09:59:09 -0700 (PDT)
Subject: Internet radio, Subscriber music services, AOL

dear friends,

Today is one of those days where the editors at the WSJ seem to be
conspiring to make a thematic presentation. Like "Foreign Affairs" for
music geeks.

The sequence of the articles reprinted below:

1. Hard news about online radio royalties
2. Soft news about which online music services to patronize
3. Very hard news about media monopolies and their self-cannibilizing



May 15, 2002
Webcasters, Music Labels Both Claim
Underdog Label in Royalty Squabble


Last month, Congressman Dennis J. Kucinich wrote a letter to the U.S.
Copyright Office about an obscure issue: royalties paid by online-radio
operators. The congressman got involved after the head of a small Internet
company in his Ohio district told him his firm was threatened by the
proposed rates.

"He clearly pointed to the danger it was in," says the Democrat, who also
got about 100 e-mails on the issue from constituents. He quickly decided
that Internet radio is "an exemplification of free speech," and vowed to
fight for it.

Mr. Kucinich's letter demonstrates how Webcasters have been rallying
support on the royalty issue, the subject of a Senate Judiciary committee
hearing Wednesday. In fighting royalty rates proposed by an arbitration
panel, online-radio operators are battling the major recording firms and
their trade group, the Recording Industry Association of America. "We are
certainly the David against the RIAA Goliath of the five big record
labels," says Kevin Shively, director of interactive media for
Beethoven.com, a Hartford, Conn., classical-music Webcaster owned by a
small closely held radio company, Marlin Broadcasting LLC.

But while many Webcasters are tiny, there are some Goliaths on their side,
too. Represented by the National Association of Broadcasters, major radio
companies also are calling for lower royalty rates, and simpler
data-reporting requirements for their online radio. (Many traditional
radio stations put their programming online as well.)

Other firms with a stake in the new business, such as data-collector
Arbitron Inc., also have weighed in on the side of the Webcasters. The
royalty rate "is really going to be a burden on our industry," says Alex
Alben, a vice president at the prominent software firm RealNetworks Inc.,
in Seattle. He says the company has lobbied lawmakers and helped fund the
legal team that represented Webcasters in the royalty rate proceeding.
RealNetworks makes software widely used by Webcast listeners.

On the other side, big record companies are also trying to pose as the
underdog by playing up the plight of small, independent music companies
and artists who would benefit from the online royalty payments.

So while the industry is dominated by conglomerates such as Japan's Sony
Corp. and Vivendi Universal SA, the delegation that visited Capitol Hill
to discuss the issue Tuesday included less recognizable names such as
Truth Thomas, a gospel artist, and Gary Himelfarb, owner of reggae label
Real Authentic Sound Inc.

"We have a lot at stake here," says Mr. Himelfarb, who says the recent
downturn in the music industry, aided by widespread home copying of CDs,
forced him to lay off two of his six employees.

The clash stems from a 1998 law that gave Webcasters the right to use
music, but required that they pay a royalty fee, set by arbitrators, to be
split between labels and performers. After years of industry discussions
and complicated arbitration proceedings, arbitrators in February proposed
that Internet-only Webcasters pay 0.14 cent per song per listener. Radio
companies that put their broadcasts on the Web would pay half that, while
noncommercial Webcasters, including public radio stations, would pay
special, lower royalty rates.

The Copyright Office, which is part of the Library of Congress, advises
Librarian of Congress James H. Billington on such matters. Mr. Billington
must decide by Tuesday whether to put that rate into effect.

Internet-radio companies, aghast at the proposed rates, quickly cobbled
together a response. They inserted Web links so users could blast protest
e-mails directly to Congress. A new site called saveinternetradio.org
(saveinternetradio.org1) posted a list of "articulate spokespeople," who
soon showed up in news coverage about the issue.

In meetings with congressional staffers, online-radio executives said the
proposed rate could kill their firms. A letter to the Librarian of
Congress signed by 20 members of Congress expressed concern that the
proposed rates might be too high.

On May 1, the Webcasters had their most high-profile demonstration yet, a
"Day of Silence."

Many replaced their usual music with programming about the royalty debate.
The demonstration also drew support from bigger companies such as
Susquehanna Radio Corp., a closely held radio firm based in York, Pa.,
that gave announcements about the issues on its 21 online stations. Cox
Radio Inc., Atlanta, majority owned by Cox Enterprises Inc., did the same
on its 71 online stations. Webcasters estimate that lawmakers have
received tens of thousands of e-mails and faxes, while the Copyright
Office said it has gotten around 8,000.

The Webcasters also complain that the record labels are demanding too much
data about all the music they play online. They aren't the only ones --
broadcasters say it's impossible to track every detail of each song they
play online.

"The fact that we're standing with the little guys should say that it's
not good for anybody," says Brian Parsons, director of technology for
Clear Channel Radio Interactive, a unit of Clear Channel Communications
Inc., based in San Antonio.

Record labels have argued that the proposed rates may not be high enough
to compensate music companies and artists, who have been hurt by Internet
music-sharing services such as Napster and aren't paid when their songs
are played on broadcast radio. In one public letter defending royalties,
RIAA licensing arm SoundExchange listed board members and supporters, who
included artist advocates such as Don Henley and the American Federation
of Television and Radio Artists. "Artists need that income," says Dan
Navarro, a singer and songwriter on the national board of AFTRA.

On its Web site, SoundExchange encouraged visitors to e-mail lawmakers.
The music industry also has rallied 17 members of Congress to urge the
Librarian of Congress to ignore outside lobbying.

Write to Anna Wilde Mathews at anna.mathewsATwsj.com2
URL for this article:
Hyperlinks in this Article:
(1) http://saveinternetradio.org/
(2) mailto:anna.mathewsATwsj.com
(3) http://online.wsj.com/article/0,,SB1021427715810025920,00.html
(4) http://online.wsj.com/article/0,,SB1021411348317935160,00.html
(5) http://online.wsj.com/article/0,,SB1021409028751246560,00.html

Updated May 15, 2002

Copyright 2002 Dow Jones & Company, Inc. All Rights Reserved
Printing, distribution, and use of this material is governed by your
Subscription agreement and Copyright laws.
For information about subscribing go to http://www.wsj.com


May 15, 2002
Even You Can Download Music:
Sites Add User-Friendly Features


The big online record companies are finally facing the music: The services
they rolled out to battle Napster, the late, lamented free service, have
failed to catch on.

But now four of the major services are taking steps to fix the problems.
Next week, one service, Rhapsody, plans to begin letting users actually
burn CDs with some downloaded music -- unusual in an industry that still
desperately wants customers to buy records in the stores. Another
provider, FullAudio, is about to announce that it has signed another
record-label partnership, helping to address one of the biggest failings
of the commercial sites -- too few songs.

Two other providers, MusicNet and pressplay -- which are both backed by
big record companies -- say they're also trying to get more songs online.
And MusicNet is in talks to let users burn CDs, which requires approval
from the record labels.

It's the latest half-step by the music industry to fight back against the
dozens of free, but arguably illegal, music-swapping services such as
Napster and its many imitators, including Kazaa and LimeWire. The
advantage to the Napster clones, of course, is that they're free. On the
paid sites, the sound quality is generally better, and they download
faster. Some of the major subscription-music sites include Rhapsody,
FullAudio, MusicNet and pressplay.

Do any of the sites make it easy for a non-gearhead to download music? All
of them still have significant disadvantages, such as awkward software or
confusing pricing policies.

But for a person who's never downloaded before, the most straightforward
of all the subscription services is Rhapsody. It claims one of the biggest
song libraries -- 138,000 -- weighted heavily toward classic rock and
classical music. It's also one of the best-organized, with good music
reviews and the feel of a service put together by people who are
passionate about music. Its pricing policy is among the simplest: $9.95 a
month for unlimited listening.

Here's how it works: Getting set up is relatively painless, provided users
have a PC made within the past few years and a high-speed Internet
connection, to make the music downloads speedy. Rhapsody, like most
services, requires downloading software over the Internet. For Rhapsody,
the software is available on its home page, www.listen.com1.

Once the PC is connected to the Internet, starting the program begins a
10- to 15-minute registration process of collecting credit-card
information and user details. After that, the program is ready to start
searching for and playing music.

The commercial services all charge users a flat monthly fee, usually
beginning around $10 a month, but the privileges vary. For that price,
most provide a set number of song downloads, as well as "streams" -- a
term that refers to songs that play while they download from the Internet,
but which aren't actually stored on users' computers (sort of like a song
playing on the radio). Most services have a free trial period, ranging
from a week to a month, although MusicNet is an exception to that.

Of the four best-known commercial services, only pressplay currently
offers CD burning, but it costs extra and not every song can be burned.
All the other major services say they're working with their record-label
partners to add this feature, along with the ability to download music
into portable devices like MP3 players. Music companies are concerned the
CD burning further opens their music up to piracy -- but without it, music
downloaded from the commercial services is trapped on PCs.

Some services have other idiosyncrasies. For example, Rhapsody requires
your PC to actually connected to the Internet -- it can't be off-line --
in order to play music.

Pressplay puts the fewest restrictions on how consumers can use music they
buy. It allows subscribers to accumulate songs for as long as they pay a
monthly subscription fee. However, once the service is canceled, the music
becomes unplayable soon thereafter -- an arrangement that may be jarring
to fans accustomed to the permanence of their CD collections.

More awkward is the plan on MusicNet. In effect, the company rents songs
to subscribers one month at a time. But MusicNet doesn't require you to
download software; it relies on the Windows Media Player that comes
already installed on many PCs.

Small wonder, perhaps, that so many users have flocked to the free
services in recent years, despite the hassles and questionable legality.
According to Redshift Research, users of the free site Kazaa copied
roughly 900 million files in March alone, much of that music. By contrast,
MusicNet has only about 40,000 customers.

URL for this article:
Hyperlinks in this Article:
(1) http://www.listen.com
(2) mailto:nick.wingfieldATwsj.com
(3) http://online.wsj.com/article/0,,SB1021398992612974000,00.html
(4) http://online.wsj.com/article/0,,SB1021405981861843880,00.html
(5) http://www.listen.com
(6) http://www.yahoo.com
(7) http://www.real.com
(8) http://www.knixcountry.com
(9) http://www.limewire.com
(10) http://www.kazaa.com

Updated May 15, 2002 8:04 a.m. EDT

Copyright 2002 Dow Jones & Company, Inc. All Rights Reserved
Printing, distribution, and use of this material is governed by your
Subscription agreement and Copyright laws.
For information about subscribing go to http://www.wsj.com


May 15, 2002
AOL Time Warner Finds Its Divisions
At Odds Over Online Music Royalties


Two weeks ago, hundreds of Internet radio stations went silent as part of
a protest against proposed royalties that they say would put them out of
business. But the biggest Internet radio station of all, run by AOL Time
Warner Inc.'s America Online service, kept playing music all day long.

A big part of the reason: America Online wants to keep the peace with a
sister division, Warner Music Group, which is fighting for the royalties
for its recording artists and labels.

"It would appear that AOL has found itself on both sides of the table,"
says Raghav Gupta, chief operating officer of Live365 Inc., one of the
small Web radio stations that is fighting the royalties.

So much for synergy between the former AOL and Time Warner: Two of the
company's business units are divided on this important issue. Yet perhaps
because they are now under the same roof, the America Online and the
Warner Music divisions have been treading lightly. America Online's radio
services haven't been vocal in supporting their Web-radio allies, while
Warner Music executives have been careful about which battles of the
recording industry they join.

"This is a dispute between industries and we have units in each of the
industries involved," says Kathy McKiernan, an AOL Time Warner
spokeswoman. She adds that the New York company's units are participating
in the government mediation process that is supposed to determine the
royalty rate. "We have confidence that the process will produce a
[royalty] rate that will work for everyone involved."

AOL's delicate balancing act highlights the tensions the issue has raised.
Although the royalty question has been simmering for years, it is expected
to reach a boil today as Chairman Patrick Leahy of the Senate Judiciary
Committee holds a hearing on the matter, with witnesses including Hilary
Rosen of the Recording Industry Association of America and Frank
Schliemann of Onion River Radio, a small Webcaster from Sen. Leahy's home
state of Vermont who says the fees would put him out of business. "We
would have to pay a royalty fee that is 78% of our gross revenue based on
the first three months of 2002," he says. "This is going to decimate the

The dispute revolves around a 1998 law that will permit record labels to
charge royalties for music played online. Until now, radio stations --
both online and offline -- paid royalties only to composers, not to the
musicians and singers who recorded the songs. That meant, for example,
that Aretha Franklin never got paid a dime for all the times that "(You
Make Me Feel Like) A Natural Woman" has been played on the radio, but the
song's writer, Carole King, got paid each time.

Under the new law, artists will finally start getting paid -- but only
when their songs are played online, not when they are played on
traditional radio stations. The new fees are set to be finalized by the
Copyright Office this month.

Under the proposed rates, Web broadcasters will pay the music industry .14
of a cent a song per listener, with an annual minimum payment per Web
station of $500. "It's the first step to correct decades of inequality,"
says John Simson, executive director of SoundExchange, a trade association
of the RIAA that advocates for the fees.

But Webcasters say the law will create a new inequity since the online
radio stations are forced to pay but the better-funded traditional radio
stations are exempt. Many Web radio stations have very little revenue.
"The royalty rate ... will bankrupt virtually all the of the independent
Webcasters," says Kurt Hanson, publisher of the Radio and Internet
Newsletter, who helped organize the "Day of Silence" protest by Web

America Online's Web-radio division, based in San Francisco, has kept
quiet about the fees, though some of its employees object to them,
according to people familiar with the situation. AOL Time Warner's Ms.
McKiernan says the company made the decision not participate in the day of
silence, in part, because of its longstanding policy of not using the
online service for political purposes.

Publicly, America Online has left the issue in the hands of the Digital
Media Association, a three-person outfit in Washington, D.C., that is the
leading advocate for the Webcasters fighting the royalty proposal.

"I consult with AOL regularly," says Jonathan Potter, executive director
of the association. America Online is on the board of directors of DiMA.
He says the royalties for small broadcasters should be based on a
percentage of their revenue, and that eventually online and offline radio
should be treated equally.

Meanwhile, Warner Music Group has aligned itself with the powerful RIAA
and its SoundExchange, a 22-person division that is leading the battle to
support the proposed royalty rates. "Warner has been very supportive of
our efforts," says Mr. Simson of SoundExchange. SoundExchange had
originally sought higher royalties but now says the Copyright Office's
recommendation should be respected.

Warner Music, a founding member of SoundExchange, has carefully chosen
which of the group's battles it wants to join. Paul Robinson, a senior
vice president of business affairs at Warner, signed a recent "open letter
to the music community" from SoundExchange that declared that "Webcasters
and simulcasters are not entitled to a free ride or a subsidy."

However, Mr. Robinson, who is on the board of SoundExchange, declined to
sign a subsequent letter complaining about the Webcasters' "day of
silence." People familiar with the situation say he wasn't given much time
to consider the letter and was wary of the tactics being used.

"In this one specific case we chose not to participate in a
public-relations ploy by a small number of Webcasters," says Dawn Bridges,
a Warner Music spokeswoman. "We are continuing to participate actively in
the process of discussing substantive issues with the other RIAA and
SoundExchange companies."

Write to Julia Angwin at julia.angwinATwsj.com1
URL for this article:
Hyperlinks in this Article:
(1) mailto:julia.angwinATwsj.com
(2) http://online.wsj.com/article/0,,SB1021427715810025920,00.html
(3) http://online.wsj.com/article/0,,SB1021411476917809000,00.html
(4) http://online.wsj.com/article/0,,SB1021409028751246560,00.html

Updated May 15, 2002

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