Tales of the Sausage Factory

FCC Begins Inquiry Into Arbitron Portable People Meter

Sometime back back, I noted the flap over the Arbitron Portable People Meter and the Petition by the Minority Media Telecommunications Council (MMTC) for the FCC to take action. The FCC put the Petition out on public notice last September, and has now issued a Notice of Inquiry on the matter.

As always, the questions are (a) why do we care about this? and (b) Even if we care, does the Commission have authority to do anything? In answering this last time, I observed: (a) we care because the entire economics of the radio industry are driven by ratings, and the FCC’s own rules rely on Arbitron ratings for a number of purposes, and (b) the FCC can always investigate anything related to its areas of jurisdiction. At worst, it provides a good forum for debate and an opportunity to tell Congress “Yo! this is important, somebody needs to do something about this for these reasons.” these are pretty much the conclusions the FCC comes to in its Notice. After observing in footnote 1 that it has broad powers to investigate, the Commission frames the questions as:

This NOI investigates the impact of PPM methodology on the broadcast industry as well as whether the audience ratings data is sufficiently accurate and reliable to merit the Commission’s own reliance on it in its rules, policies and procedures.

I am hopeful that we see a good, robust debate here although I don’t expect anything in the way of Earth-shattering revelations. There is an interesting problem of what information Arbitron will reveal about its processes, and whether the Commission will provide some assurances that it will keep proprietary information out of the public record. If it does, it makes it much harder for those who say the process is unfair to respond. But if it doesn’t, it’s analysis is going to be incomplete.

Mind you, it’s not at all clear what authority the FCC has over Arbitron directly. But the FCC can take certain actions if it doesn’t like what it sees, giving Arbitron incentive to play and try to resolve concerns. The FCC can declare Arbitron unreliable and no longer rely on it for regulatory determinations. That’s not exactly the kind of publicity you want if you make your living based on the accuracy of your ratings system. Alternatively, if the FCC doesn’t see anything wrong, it can always conclude that Arbitron remains acceptable for the FCC’s purposes. That will be of enormous assistance to Arbitron in removing any cloud over its rating system.

Bottom line, the NOI is a smart move by the Copps FCC on multiple levels. It doesn’t assert any authority, it doesn’t prejudge, and it services an important Democratic constituency. Hopefully, Arbitron and its critics will use the FCC as a neutral forum to develop an mutually acceptable solution.

Stay tuned . . . .

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Tales of the Sausage Factory

Why You Need to Call Your Member of Congress to Save Internet Radio

As internet radio subscribers today may have discovered, a number of internet radio sites are participating in a “Day of Silence” to draw attention to the upcoming increase in internet royalty rates that will drive many of the smaller sites out of business (and probably drive up rates for others). On July 15, the rates paid by internet broadcasters will increase dramatically (retroactive to 2006), thanks to a decision last spring by the Copyright Royalty Board.

Supporters of internet radio are pushing members of Congress to support the Internet Radio Equality Act (H.R. 2060 and companion bill S. 1353 in the Senate). The Bill would fix the rates for internet broadcasts to match the rates paid by satellite radio providers (terrestrial radio providers pay no royalties, heck they are able to extort payola from the music industry). You can find much useful information and how to take action from this Free Press Action page.

UPDATE: Members of Congress Beg Industry Not To Force Them to Actually, Y’Know, Do Stuff.

And I want to stress that action to pass this bill is desperately needed. Why? Because conventional wisdom (CW) in DC is that this bill is unnecessary since everyone expects Soundexchange (which reps the music industry on royalty collections for online play) and the “internet radio industry” to cut a deal. As the CW goes, everyone has too much to lose if the rates really do go into effect — what with public radio stations and other smaller radio broadcasters stopping their streaming, popular streaming sites like Live365.com potentially going under and independent musicians losing their exposure and so forth — that the relevant parties must inevitably cut a deal. And, if all else fails, the DC Circuit may solve the problem by reversing the Copyright Board. So why pass a bill when the problem will take care of itself?

Unfortunately, experience tells me that it is precisely in situations like this, when everyone thinks a deal is inevitable, that there is the highest risk of things spiraling out of control and falling apart. Each party thinks that because “failure is not an option” it can hang tough and the other side must blink. Usually, this collapses into a last minute scramble to reach an 11th-hour agreement. But given the diversity of players and complexity of issues, I don’t think you can patch this up with a Marathon session that ends at 11:59 p.m. on July 14.

Consider, there is a huge disparity among the terrestrial radio broadcasters on what would be the acceptable dimensions of a deal. Industry giants like Clear Channel and Viacom will be willing to settle for a much higher rate than either small commercial operators or NPR. NPR, in turn, will settle at a much higher rate than the small non-commercial stations such as those represented by the National Federation of Community Broadcasters. The “internet broadcasters” have even more exagerated divisions by size and business model, with many of the smallest players absent from the negotiations. An industry with participants from Yahoo! to the archtypal individual in the basement is not going to come together on a “unified position.”

Worse, there are other elements of the structure besides the rate itself. Other issues include the reporting requirments and DRM management systems demanded by the music labels. While these are not addressed by the legislation (which only addresses rates), the negotiations among the industry participants will likely include extraneous issues in an effort to get a critical mass of industry players on board. Again, this favors the largest participants with the most diverse interests.

Finally, the largest players — particularly the big radio chains — have incentive to cut a deal that reduces the existing rate but still jacks up the price (either in terms of rates or interms of additional monitoring and reporting costs) for smaller players (both terrestrial broadcasters and internet broadcasters).

On the music side, there is considerable diversity of opinion among musicians about what to do here. On the one hand, independent musicians love internet radio as an outlet where they actually get play time and do not want to see the internet broadcasters strangled. On the other hand, it is very difficult for people to aggressively advocate to cut their own pay. A good analogy is where a union negotiates with management for pay and benefit cuts to stave off a business collapse. On the one hand, workers want to keep having jobs. OTOH, it is tough to swallow — particularly when the fat cats (here, the major labels and the large terrestrial radio chains) are still making out like bandits. There is a natural inclination of independent musicians to ask “why the Hell should people ask us to save internet radio at our expense when we already get shafted by the system? Aren’t we entitled to get a pay raise?”

So, in my opinion, I think getting a “comprehensive settlement” that eliminates the need for legislation is a lot harder than people think. And, even if there is a settlement, it is almost certain to tilt toward the interests of the largest industry players with some crumbs thrown to the little guys. Everyone will pose for the photo op looking exhausted and saying that it was a tough negotiation but something everyone can live with. Meanwhile, the cutting-edge tiny independents — who don’t even register on the DC policy meter but who most need protection of a set, fair rate to survive — will die a silent death offstage.

And, even if there is a settlement and it is livable, this decision will hang over internet radio providers like a damn Sword of Damocles, shaping the industry and forcing them to play by the rules set by the big music labels and the biggest radio operators because they live in fear of when the agreement expires and they have to go through all this again. A world where internet radio broadcasters have a right to music at a set rate is a very different world from one where they must go begging on bended knee to the copyright lords for the privilege of access to music that competes with other powerful interests.

So if you love vibrant and truly independent internet radio, and if you want to keep the door open so that the next generation of internet radio innovators can come into being, please, please, PLEASE call your Sentors and Representative and tell them to support the Internet Radio Equality Act. Tell Congress to resolve this issue for good, in a way that both makes sure performers get paid and still allows internet radio and community-based terrestrial radio broadcasters to defy both the major labels and the big broadcasting chains.

Stay tuned . . . .

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Tales of the Sausage Factory

Hallmark Channel to Show Documentary on Low Power FM

I’m posting an announcement for a documentary about low power FM (LPFM). As regular readers probably know, I represent United Church of Christ, which made the documentary, at the FCC on LPFM issues.

LPFM: The People’s Choice“ to air on the Hallmark Channel on Sunday, January 8th at 7 am EST and 7 am PST.

There’s a new sound on the air and it’s emanating from a source deep in the hearts and minds of Americans across the country. ”LPFM: The People’s Choice“ chronicles the extraordinary story of a low power, low cost radio service that withstood the rigors of Capitol Hill and special interest attacks. Today, LPFM is sending out a loud and clear signal — Freedom of Speech has a new ally, and it’s LPFM. ”LPFM: The People’s Choice” is more than a documentary- it is a rallying cry to build community around locally owned media. The film chronicles how low power FM radio is bringing diverse people closer together and giving new life to disadvantaged communities, new strength to neighborhoods and new voices in the marketplace of ideas. This program is not a debate about the merits of LPFM vs. the radio industry. Rather, it is meant to educate the audience about the possibilities for finding a new voice with LPFM. The film was produced by the Office of Commmunication of the United Church of Christ. For more information, please visit us at www.ucc.org/ocinc, or call 202-263-2576.

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Tales of the Sausage Factory

Tales of the Sausage Factory: Korn Rebellion — But Will The Revolution Be Televised?

Korn has put out a new, very indecent (for language only)video protesting the current state of the music business. Oddly, it is no longer downloadable from the Korn Website. Hmmmmm……

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