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Behind the Scenes at RIAA/Small Webcasters Negotiations

We mentioned that there was a tentative deal reached between the “small webcasters” and the RIAA regarding royalty payments over the weekend, but that at the last moment SOMETHING happened to jeopardize the deal:

    Under an agreement reached previously, royalty money would be distributed directly to musicians, rather than going through record companies, after lawyers’ fees and other expenses were taken out.

    But while the new agreement states that legal fees will be taken out of royalties, it makes no guarantee that musicians will then be paid directly, said Ann Chaitovitz, national director of sound recordings for the American Federation of Television and Radio Artists.

    As a result, the deal may be threatened.

    “They knew we would object to it,” Chaitovitz said.

Blogcritics.org has exclusive information from Michael Roe, of radioio, one of the webcasters involved in the negotiations:

    To provide everyone with a understanding of my and others postion on the issue, what follows is a email that I sent last night to my contacts in the House and Senate Judiciary that sums it up nicely:

    I am *extremely* disturbed to learn that the RIAA had language added to HR5469 (The Small Webcaster Act) that would:

    1 – eliminate direct payments to artists
    2 – allow expenses to be recouped before making payments to artists

    This language is not, of course, in the copy of the Legislation provided to us by the House Judiciary staff.

    Despite the RIAA spin, small commercial webcasters actually support artists – and artist rights. We have *never* sought to create an industry at the expense of the artist. And, even though this Bill is intended to provide Legislative relief for my own business and industry, as a matter of principle, I am *extremely* disturbed to think that this same Bill could become law at the expense of artists and artist rights.

    Last week the RIAA rallied the artists and unions to railroad HR5469 on grounds that it would delay artists payment – and now apparently the RIAA is attempting to use the same bill to delay payment themselves and/or to avoid direct payment to artists altogether. In truth, it is the RIAA and their label clients who have created an industry off the backs of artists – and this is proof of it.

    Either that or its proof that they have actively sought to insert language that would doom the fate of HR5469. They couldn’t possibly think that the artists and artists union would support such language. And they were sadly mistaken to think that desperate small business owners would support such language.

    Please look into this matter. Personally, I have spoken to two artist organizations this evening who have expressed their concern. Further, these artists groups seek a way to eliminate this language without jeopardizing the prospect of Legislative relief for small webcasters. There *will* be a strong protest from artists and artists unions.

    This Legislation is the last remaining hope for 100’s of small commercial webcasters who will be forced out of business on October 20. We need your help.

    It is impossible to overstate the deep appreciation that all webcasters feel for the work of you and your offices on our behalf. We are tired. We are beaten. We are close to giving up.

The RIAA is still running this statement on their site, which Michael Roe has since disavowed:

    Joint Statement From RIAA And Voice of The Webcasters On Support for HR 5469

    Monday, October 7, 2002

    Joint Statement From The RIAA And Voice of The Webcasters On Support For HR 5469

    “The Recording Industry Association of America (RIAA) and the Voice of The Webcasters (VOW) announce their support for HR 5469, the Small Webcaster Amendments Act of 2002. This Act sets rates and terms for the period of 1998 through 2004 for the use of sound recordings on small commercial Internet webcasting stations.

    “The act embodies compromises for everyone involved. We appreciate the assistance of Congressional leaders in helping move this process along. We look forward to building business partnerships that create the best possible music experience for fans.”

A request for a statement from the RIAA on the matter has not yet been returned.

Roe elaborates further:

    Last week, much to our surprise (and everyone really), hr5469 was introduced by Sensenbrenner – a bill intended to provide a 6 month stay on the payment of royalties. If you read sensenbrenners own description of the bill, his intent was to obtain this stay for two reasons: 1 – provide further incentive and time for a private negotiation since the October 20 was fast approaching, and 2 – delay payment pending the outcome of several appeals and requests for stay.

    The RIAA was caught offguard (as were we frankly) by HR5469. We were pleased. They were not.

    The RIAA then rallied the support of AFL-CIO to railroad Hr5469 on the ground that it would delay payments to artists who had waited for 4 years to get paid.

    It is clear that the House Judiciary wanted a deal. And given the fact that HR5469 was probably going no where in its original form, the Chief of Staff of the House Judiciary ordered the RIAA and our group to the House Judiciary last week – and provided marching orders to ‘cut a deal.’ Further, we learned that our once private deal would now provided the basis for what would become a modified version of HR5469. (Again, we went into this wanting to create a private, option deal. and now it had amazingly morphed into a piece of legislation intended to provide relief for small commercial webcasters. We were as shocked by this development as most of you probably were when you learned of it.)

    The House Judiciary Staff itself sat in on and oversaw much of the actual negotiation. This negotiation went on everyday last week – 10 to 12 hour days of intense negotiation – 15 hours on Friday. This negotiation
    continued into Saturday and had still not yielded a deal. At 830pm on Saturday both side were entrenched in their positions – and the negotiations broke off. At 1030pm on Saturday, the Chief of Staff of the House Judiciary contacted both sides and commanded them to the Hill on Sunday morning.

    They were not happy that we had not reached a deal. Further, the in effect said ‘if you cannot reach a deal, well reach one for you’. They proceeded to hear each sides position – then convened. They returned and produced a deal that both sides were unhappy with. Both sides provided further input, and the House Judiciary staff reconvened. The returned with a second deal – on that both sides could, somewhat reluctantly agree to. The rest of Sunday was spent putting the final touches on the deal and whipping it into legislative language by the House Judiciary staff while everyone else watched a Washington Redskins game.

    We obtained a copy of the final Legislative language – and left. THERE IS NO MENTION of artist language (specifically the language pertaining to direct payments and recoupable expenses is ABSENT in our copy of the ‘final’ bill).

    Apparently, this language was added AFTER we left the table. We had NO knowledge of it. We DO NOT support it.

    It is my understanding that artists and artists groups are currently protesting this language. WE SUPPORT artists and artists groups in their protest of this language. We are *pissed* about it.

    It is clear to us that the RIAA added this language at the 11th hour in an attempt to ensure the failure of HR5469. They couldn’t possibly have thought that artists and artists groups would support this language. And they were sadly mistaken to think that struggling, desperate, small business owners would support it just to save their own asses with what is arguably our last chance to have legislative relief in this congress.

    It is my further understanding that all parties are now at the table with the House Judiciary working to resolve this dispute.

    Regardless of the outcome, webcasters and artists MUST unite in an effort to expose this as example of the RIAAs unfair and predatory practices. Artists and artists groups should remember that last week they were **used** to block the 6 month stay on grounds that the stay would delay payment. This week the RIAA itself seek to use HR5469 to delay or avoid payment to the altogether.

    The RIAA needs to put its spin machine on notice that the days of its using the ‘taking food out of the mouths of starving artists’ against webcasters in the press and on the Hill has now come to an end!

UPDATE
The bill was passed by voice vote:

    Mr. Sensenbrenner moved to suspend the rules and pass the bill, as amended.

    2:45 P.M. –
    H.R. 5469:
    to suspend for a period of 6 months the determination of the Librarian of Congress of July 8, 2002, relating to rates and terms for the digital performance of sound recordings and ephemeral recordings

    The title of the measure was amended. Agreed to without objection.
    Motion to reconsider laid on the table Agreed to without objection.

    On motion to suspend the rules and pass the bill, as amended Agreed to by voice vote.

    2:34 P.M. –
    DEBATE – The House proceeded with forty minutes of debate on H.R. 5469.
    Considered under suspension of the rules.

    Mr. Sensenbrenner moved to suspend the rules and pass the bill, as amended

Final language of the bill can be found here. In this final version, it woud appear payments will be made directly to artists and copyright holders, and that the RIAA’s bid to act as intermediary has been thwarted.

RAIN discusses matter here:

    The House of Representatives, in a “suspension” vote that bypasses the usual committee process, has just passed H.R. 5469, the bill which amends the copyright law to include the royalty rate compromise reached last night by small commercial webcasters and the record industry.

    “The interplay between Berman and Sensenbrenner was really interesting,” noted 3WK co-founder Wanda Atkinson, who watched the proceedings on C-SPAN. “Berman acknowledged Sensenbrenner’s ‘ham-handed- manner of introducing the earlier version of HR 5469, but then indicated he realized that the bill introduction was actually Sensenbrenner’s way of forcing webcasters and the RIAA to come to an agreement.”

    This means the bill now goes to the Senate, where, if it passes, and with a signature from the President, it will become law. It is expected to hit the Senate floor within the next week or so.

    The bill specifies that the rate cannot be claimed to be a “willing buyer/willing seller” by participants in any future CARP arbitration. (This should satisfy the NAB’s primary concern last week that had them intending to not support the bill because it might be seen as establishing a new “marketplace” rate.)

UPDATE
In a radical plot shift, Michael Roe reports that

    I have just learned from an extremely reliable source that IT WAS NOT the RIAA who interjected the artist issue into the debate that lead to the original language of HR5469 – *rather* it was congressional staffers who wanted these outstanding issues dealt with.

    I stand corrected.

    Further, it would appear that the resulting artists language in HR5469 has been modified and or eliminated to the satisfaction of AFTRA and others.

    If it works for them, it works for me.

    I look forward to forging an on-going dialogue with artist, labels, and others concerning this and all related issues.

I take it back also, and gladly so. On the other hand, if the RIAA had responded to my inquiry, the matter could have been cleared up several hours ago.

In addition, the fact that staffers made the suggestions doesn’t mean they didn’t have help in coming up with the ideas – not to be paranoid or anything. Some remember a congressional staffer named Mitch Glazier, who went to work for the RIAA.

UPDATE
John Borland’s wrapup from CNET:

    The bill, which still must pass the Senate before Webcasters will see any tangible effect, marks a surprise political victory for a loose Internet community that had never previously launched any concerted political action.

    Webcasters are facing an Oct. 20 deadline for the first payments of royalty fees to record labels and artists for the rights to play music online. Those payments, set by the Librarian of Congress and the Copyright Office in a controversial June ruling, hold Internet radio stations responsible for paying about a 14th of a cent for every song they play for each individual listener.

    Big Webcasters complained about the ruling, but small companies, including over-the-air and college radio stations, exploded. Many had revenue streams small enough that it would be impossible to foot the bill under the new regime, they said. Dozens of organizations began shutting down in advance of the fee deadline, while a small group of vocal critics approached Congress for help.

    That effort culminated when Rep. James Sensenbrenner, R-WI, introduced a bill that would have put off payments of the new Webcasters royalties for another six months. Designed as much as a tool to force the various sides to the bargaining table as a genuine policy statement, it served its purpose. Negotiations peaked last weekend, finally reaching agreement Sunday after strong pressure from congressional staff.

    “We appreciate the assistance of congressional leaders in helping move this process along,” the Recording Industry Association of America said in a joint statement with Webcasters. “We look forward to building business partnerships that create the best possible music experience for fans.”

    Some concern arose late in the process from artists groups that direct royalty payments to artists–a provision of the original royalty plan and a rarity in an industry where labels hold most of the financial strings–were being eliminated.

    However, a representative of the American Federation of Television and Radio Artists (AFTRA), one artists group involved in the process, said their concerns had been addressed and that the group supported the bill.

    Under the bill, Webcasters that make less than $250,000 per year would pay about 10 percent of revenue, or 7 percent of expenses, as royalties. Whichever figure is greater would be used. Companies that make between $250,000 and $500,000 a year would pay 12 percent of revenue or 7 percent of expenses.

    Rates for retroactive payments dating back to 1998 would be just 8 percent of a company’s revenue or 5 percent of its expenses, with an installment plan availible. The ceiling for qualifying as a small Webcaster would be raised to $1 million in annual revenue for the year 2004, the last year that the bill’s rates would be valid.

    Larger companies would pay the original fees as laid out by the Librarian of Congress.

    Looking on from their positions scattered around the country, the small Webcasters are dizzied by the experience–even if they’ve still got another significant hurdle to pass.

    “You have to stop and remember that without exception, the most political thing any of us had ever done before was vote,” Roe said. “Now here we spent seven months doing something it took the House seven minutes to pass.”

About Eric Olsen

Career media professional and serial entrepreneur Eric Olsen flung himself into the paranormal world in 2012, creating the America's Most Haunted brand and co-authoring the award-winning America's Most Haunted book, published by Berkley/Penguin in Sept, 2014. Olsen is co-host of the nationally syndicated broadcast and Internet radio talk show After Hours AM; his entertaining and informative America's Most Haunted website and social media outlets are must-reads: [email protected], Facebook.com/amhaunted, Pinterest America's Most Haunted. Olsen is also guitarist/singer for popular and wildly eclectic Cleveland cover band The Props.

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